AI-fuelled chip rally tested by semiconductor demand warnings
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The rally in US chip stocks that has seen Nvidia and AMD more than double in value over the past year is under pressure after warnings that the artificial intelligence boom is masking a broader slump in semiconductor demand.
The Philadelphia Stock Exchange Semiconductor Index, which tracks the 30 top US chip companies, has risen by more than 50 per cent in 12 months as investors bet on continued soaring demand for the AI processors that power OpenAI’s ChatGPT and similar apps.
But only a handful of companies have benefited significantly from the insatiable demand for AI chips among Big Tech companies and start-ups such as OpenAI and Anthropic over the past year. Nvidia and its suppliers, including TSMC and Supermicro, have enjoyed disproportionate gains, while most other chipmakers grapple with stockpiled inventories and damp customer demand across a range of industries.
Disappointing forecasts for the first quarter of 2024 from industry bellwethers Intel and Texas Instruments this week have dented Wall Street’s confidence in a broader recovery. A dismal year for PCs and smartphones in 2023 has run into new concerns about demand from automakers and industrial applications.
The durability of the chip rally that gathered pace in the final months of 2023 will be put to the test next week by earnings reports from AMD, seen as the biggest challenger to Nvidia’s dominance in supplying the graphics processing units needed to train the latest AI systems, and Qualcomm, which is betting new AI-powered smartphones will revive the mobile market.
Shares in Intel fell by around 12 per cent on Friday, shedding around $25bn in market value, after the Silicon Valley company’s forecast for revenues in the first quarter of the year fell short of Wall Street’s estimates by as much as $2bn.
2024-01-27 08:59:46
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