The AI bubble may not have burst yet, but it appears the air has gone out of it, costing $1 trillion in value.
Not "Exiting Loudly," but "Deflating the Party Balloon Without a Bang."
Not "going out with a bang" but "deflating a shockproof party balloon".
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Many major tech companies have seen their stock prices drop significantly this week. Nvidia, for example, is down about 8 percent over the past five days, and the artificial intelligence company is the only company to have seen such a drop.
Over the past five days, we've seen stock prices drop 13% for AMD and nearly 15% for Intel. Taking a broader look at the AI and semiconductor industries, CNBC reports that 20 players valued at more than $1 trillion have shed their value as investors sold shares.
The bigger picture doesn't look any better: Over the past five days, Samsung Electronics has seen its share price drop nearly 20%, SK hynix is down 18%, and Micron has seen its stock drop more than 15%.
According to a recent column in South Korea's Maeil Business newspaper, a combination of factors is likely driving the selloff in the major chip stocks, including concerns that the memory supply crisis could return to oversupply in 2029.
There's more to it than Acer's CEO's insistence that "it's impossible for shortages to last until 2030!" We also know that many chipmakers are already working to increase their production capacity, although Arizona's next-gen TSMCFab is fully booked before it's even built.
Chinese manufacturer CXMT is also on the rise, which is likely to at least partially dampen the aspirations of the western market. It is stocked on Western DUV devices and is expected to match Micron in terms of DRAM production capabilities this year. The chipmaker also recently claimed to have developed a chip architecture that increases memory density. Make no mistake, CXMT is one to watch.
In addition, CEOs from both Intel and Broadcom recently claimed that funding could become a bigger hurdle for the AI industry to overcome than even memory or power supply. Rising interest rates mean investors may feel that the balance between borrowing and return on capital for the big tech data center looks increasingly lopsided.
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So, is the AI bubble finally bursting? Even though air is clearly escaping, it's still hard to tell. The drop in stock prices caused by this massive stock sell-off may encourage some investors to buy.
Despite the high price of these infrastructure projects, demand for AI computing remains strong, according to Don Ives, technology analyst for Yorkville Ives Commercial Bank. "What changes our view is the demand signal, not the interest rate signal," Ives told CNBC.
As such, big tech likely isn't abandoning data centers any time soon, and the AI bubble may once again be headed for something more to come.
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Jess has been writing about games for over ten years, with a significant portion of that time spent working on PLAY print publications and PlayStation Official Magazine. When he's not checking out all things hardware here, he's either making an impassioned defense of a 7/10 game, daydreaming about his first novel, or envying the last time he got chased around a field with a giant foam sword.
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