The AI bubble may not have burst yet, but $1 trillion worth of air appears to have escaped
Not so much 'going out with a bang' as 'anticlimactic party balloon deflation'.
This week, numerous tech industry giants experienced significant declines in their stock prices. Nvidia's shares dropped by around 8% over the past five days, while AMD and Intel saw a 13% and 15% decrease, respectively. Across the AI and semiconductor sectors, CNBC reported that 20 of the most valuable companies had lost over $1 trillion in value as investors sold off their stocks.
The chip manufacturers that bore the brunt of this sell-off included Samsung Electronics, SK hynix, and Micron, all of which witnessed share price reductions of nearly 20%, 18%, and over 15%, respectively.
Several factors may have contributed to this substantial sell-off. Analysts have raised concerns about the potential reversal of the memory supply crisis into an oversupply scenario by 2029. Furthermore, many chip manufacturers have already been investing in expanding their production capacities. However, TSMC's upcoming Arizona fab is currently fully booked, even before its construction is complete.
Chinese manufacturer CXMT, known for its rapid growth, is also accumulating Western DUV machines. This company is estimated to match Micron in terms of DRAM manufacturing capabilities this year, and it has recently claimed a breakthrough in chip architecture that boosts memory density.
Another concern is the potential difficulty in securing financing for the AI industry. Intel and Broadcom's CEOs have suggested that financing could become a more significant hurdle than securing memory or electricity supply. The recent rise in interest rates has made investors wary about the balance between borrowing and the return on investment for big tech's data center expansion.
Even though the share prices have dropped, it's unclear whether the AI bubble has truly burst. The lower stock prices might attract some investors, and tech analyst Dan Ives, from merchant bank Yorkville Ives, believes that a demand signal, rather than rising interest rates, would be the key factor in determining the future of AI computing.
He stated, "What would change our view is a demand signal, not [an increased interest] rate signal." Therefore, big tech companies are unlikely to abandon their data centers anytime soon, and the AI bubble may once again rise to new heights.
Written by urgent.news from PC Gamer's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
