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The rally in U.S. semiconductor stocks, which 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 weakness in semiconductor demand. .
The Philadelphia Stock Exchange Semiconductor Index, which tracks the top 30 U.S. semiconductor companies, has risen more than 50% in 12 months as investors bet on a surge in demand for the AI processors that power OpenAI’s ChatGPT and similar apps. .
But over the past year, only a handful of companies have benefited greatly from the insatiable demand for AI chips among Big Tech companies and startups like OpenAI and Anthropic. While Nvidia and its suppliers, including TSMC and Supermicro, have enjoyed disproportionate benefits, most other chipmakers are grappling with building inventories and weak customer demand across a variety of industries.
Disappointing forecasts for the first quarter of 2024 released this week by industry leaders Intel and Texas Instruments undermined Wall Street’s confidence in a broad recovery. 2023 will be a disastrous year for PCs and smartphones, facing new concerns about demand from automakers and industrial applications.
The endurance of the chip rally, which picked up pace in the final months of 2023, has led to AMD being seen as the biggest challenger to Nvidia’s dominance in supplying graphics processing units needed to train modern AI systems. will be put to the test next week with the earnings report of Qualcomm, which is betting its new AI-powered smartphones will revive the mobile market.
Intel’s stock price fell about 12% on Friday, shedding about $25 billion in market capitalization, after the Silicon Valley company’s revenue forecast for the first quarter of this year fell by $2 billion below Wall Street expectations.
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Analysts said the weak numbers suggest Intel is losing out to Nvidia. Nvidia’s cutting-edge chips have become essential to companies like Microsoft, OpenAI, and Meta, which are investing heavily in new data centers focused on AI.
Earlier this month, Meta chief Mark Zuckerberg said the social media group plans to amass about 600,000 high-end GPUs, mostly made by Nvidia, by the end of this year. Billions of dollars are being invested to strengthen AI research.
While some deep-pocketed tech giants are pouring billions into AI chips, semiconductor companies like Texas Instruments and STMicro, which make parts for a wide range of customers in more traditional industries, are losing out on investors. The company is reporting weaker-than-expected demand. .
Texas Instruments this week said it expects first-quarter sales to be about 10% below Wall Street expectations. “We continue to operate in a weak environment and believe our customers will continue to rebalance their overall inventory,” Dave Pearl, TI’s head of investor relations, said on a conference call with analysts. Stated.
Analysts have noted that the $150 billion chipmaker has reported rising levels of order cancellations over the past several quarters, and Pearl said Thursday that fact remains the same.
Intel’s move triggered a sell-off across the semiconductor market on Friday. Qualcomm, AMD and Broadcom each fell about 2%, while Nvidia fell 1%.
But after nearly tripling in 2023, Nvidia’s stock price rose in January as management pointed to continued growth in 2025, even after a series of huge earnings gains over the past few quarters. It’s still up more than 25%.
“At a fundamental level, AI is just a transition from Intel being the king of the data center to Nvidia being the king of the data center,” said Jonathan Gold of technology consultancy D2D Advisory. Berg says. “Inter have lost their crown, but we are still figuring out how bad it will be.”
At the same time, Goldberg said that “all the companies associated with NVIDIA are doing well,” from chipmaker TSMC (which recently predicted revenue growth of up to 25% this year) to server component manufacturer Supermicro. “There is,” he added. Supermicro shares have risen more than 60% so far this month after the company said its revenue for the quarter ending in December exceeded expectations by 33%, or $900 million.
Even after Friday’s drop, Intel’s stock has rallied nearly 50% over the past year as investors bet on a turnaround in the PC market and Intel starting to share the huge AI demand that Nvidia has seen over the past year. %It is rising.
Intel CEO Pat Gelsinger sought to assure investors that the first quarter’s challenges were “temporary” and that business momentum “will only get stronger as the year progresses,” adding that Nvidia’s It promised “significant revenue acceleration” for rival Gaudi AI chips.
“This is not an industry-wide issue, but it has hurt the trust of a lot of people,” said Ben Bajarin, an analyst at Creative Strategies. “I feel like we’re seeing a good rebound.” [for the semiconductor market] I’ll come again this year. ”
