Stocks of major American chip manufacturers have experienced a significant decline, marking the longest continuous drop in 16 years. This downturn comes as investors react to warnings from certain semiconductor industry representatives about the potential threat of oversupply by 2029. Despite these challenges, analysts caution against jumping to conclusions about a market crash in the AI sector.
The recent correction in the global stock market has intensified pressure on memory chip manufacturers. Shares in the semiconductor sector, tracked by the ICE Semi index, have fallen continuously for eight trading sessions, a trend that has not been seen in over a decade and suggests deeper issues than just a temporary fluctuation. The iShares Semiconductor ETF (SOXX) has seen a 14% drop since its October peak, closing at $514.71 on Thursday.
A brief moment of resistance was noted when the SOXX index dipped below $496 but managed to recover by the end of the trading session. Notably, the index comprises ten major American semiconductor companies that account for 62% of its assets, including prominent names like AMD, Intel, Nvidia, and Micron. Intel has suffered a market capitalization loss of over 20% in just two weeks, while AMD's stock fell by more than 5% during a single trading day on October 14.
The AI boom's challenges have directly impacted chip manufacturers' stock prices. Recently, OpenAI disclosed that its projected annual revenue is capped at $50 billion, lower than the previously estimated $70 billion, raising concerns among investors. Additionally, Broadcom's CEO compared investment activities in AI to gambling, further shaking confidence in the stock market. Rising inflation in the U.S. has increased the likelihood of interest rate hikes, making loans more expensive for AI project financing, which has added further strain to semiconductor stocks. Increased competition from Chinese memory manufacturers is also contributing to the decline.
Analysts at UBS view this market trend as a recalibration rather than a fundamental shift in AI investment history. They argue that major tech companies, which are set to invest nearly $800 billion in capital expenditures this year, are unlikely to significantly alter their plans. Thus, the financial issue may be more about the cost of capital rather than a lack of demand for new AI infrastructure.
This situation indicates that while the chip market faces headwinds, the overall demand for AI growth remains robust, highlighting potential challenges for competitors who may not be as well-positioned to navigate these changes.
Informational material. 18+.
