Many of tech’s heaviest hitters have seen their share prices decrease significantly this week. For instance, Nvidia has seen a decrease of about 8% over the last five days—and this AI company is far from the only one seeing such a dip.
Over the last five days, we’ve seen share prices fall by 13% for AMD, and nearly 15% for Intel. Looking more broadly across the AI and semiconductor industries, CNBC reports 20 of the most valuable players have shed more than $1 trillion in value as investors sell off stock.
The bigger picture doesn’t look any better: over the last five days, Samsung Electronics has seen its share price decrease by nearly 20%, SK hynix is down 18%, and Micron has seen a dip of over 15%.
A combination of factors have likely triggered this big chip stock sell off, including concerns that the memory supply crisis may actually reverse into oversupply come 2029, according to a recent column in South Korea’s Maeil Business Newspaper.
There’s more going on than just the CEO of Acer insisting “It’s impossible for the shortage to last until 2030!” We also know that many chip manufacturers have already been working to boost their production capacity, though TSMC’s next-gen Arizona fab is fully booked before it has even been built.
Chinese manufacturer CXMT is also growing, which is likely to go at least some way towards putting a dampener on the western market’s aspirations. It’s been stocking up on western DUV machines and is estimated to match Micron in terms of DRAM manufacturing capabilities this year. The chip manufacturer also recently claimed it had created breakthrough chip architecture that increases memory density. Make no mistake, CXMT is one to watch.
On top of that, The CEOs of both Intel and Broadcom recently claimed that financing could become a bigger hurdle to overcome for the AI industry than even securing memory or electricity supply. The uptick in interest rates means that investors may feel the balance between borrowing and the return on investment for big tech’s data centre build out is looking increasingly lopsided.
So, is the AI bubble finally popping? Even as air is clearly escaping, it’s still hard to say. The resulting lower share prices from this widespread stock sell-off may inspire some investors to buy, for one thing.
Despite the high price of these infrastructure projects, the demand for AI computing remains robust according to tech analyst Dan Ives for merchant bank Yorkville Ives. Ives told CNBC, “What would change our view is a demand signal, not [an increased interest] rate signal.”
As such, big tech likely won’t be ditching data centres any time soon, and the AI bubble may once again reach for something more party-balloon shaped in the future.