Chip stocks race towards biggest gains since dotcom era on AI demand

{"text":[[{"start":11.3,"text":"Semiconductor stocks have made their best start to a year since the dotcom bubble at the turn of the millennium as enthusiasm for AI and relentless demand for hardware power a historic Wall Street rally."}],[{"start":22.450000000000003,"text":"A roughly 75 per cent gain since the start of the year has left the Philadelphia Semiconductor Index, which tracks 30 of the world’s biggest US-listed chip manufacturers, on track for its largest annual return since 1999, according to Bloomberg data."}],[{"start":38.85,"text":"The index has gained more than $5tn in market value over the past two months — about 1.5 times the value of the UK’s flagship FTSE 100 index — on the back of increasingly optimistic bets on chip manufacturers’ future earnings."}],[{"start":53,"text":"Prices for the chips that underpin AI, as well as the manufacturing equipment required to fill new chip factories around the world, have surged as suppliers struggle to match soaring demand from Silicon Valley giants. "}],[{"start":66.55,"text":"Meta, Alphabet, Amazon and Microsoft have together set aside $725bn to spend on the data centres and physical equipment needed to power the AI era this year. "}],[{"start":78.75,"text":"Charles Lemonides, founder of hedge fund ValueWorks, said: “Hyperscaler demand is locked and loaded. The [semiconductor and memory] groups are minting money and look like they will continue to do so for years.”"}],[{"start":null,"text":"

"}],[{"start":91.6,"text":"Bank of America strategists this week reiterated their “high conviction in continued AI [infrastructure] strength”, writing in a note to clients that tight supply and “under-appreciated sovereign, enterprise and industrial demand” were likely to propel further growth."}],[{"start":109.35,"text":"AI labs OpenAI and Anthropic, both of which operate at a loss as they spend heavily on data centres, are expected to fetch valuations in excess of $1tn when they go public later this year."}],[{"start":122.44999999999999,"text":"“It’s gung ho, folks,” JPMorgan chief Jamie Dimon told a conference on Tuesday. “There’s a lot of exuberance out there. Right now it’s good.”"}],[{"start":132,"text":"But he noted similar periods of exuberance before the market downturns in 1972, 1986, 2000 and 2007. “That doesn’t give me comfort,” Dimon said."}],[{"start":143.75,"text":"This year’s rally has been driven by a handful of stocks beyond the Magnificent Seven — Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla — which accounted for the bulk of the US stock market’s gains in the years after the release of OpenAI’s ChatGPT in 2022. "}],[{"start":163.55,"text":"Nvidia remains the world’s biggest public company, with a market capitalisation of $5.1tn. "}],[{"start":170.4,"text":"Yet a trio of the chip giant’s competitors — Intel, AMD and Arm — have massively outpaced Nvidia’s stock market gains this year. Their performance has been driven in part by the anticipation that the AI infrastructure market is diversifying away from Nvidia’s graphics processing units towards central processing units."}],[{"start":190.55,"text":"Intel’s shares smashed an all-time high set during the dotcom bubble after it gave a bullish outlook for CPU demand in April’s earnings. Its fortunes reversed after the US government stepped in to take a 10 per cent stake in the company last year, as well as an injection of billions of dollars in investments from Nvidia and SoftBank."}],[{"start":null,"text":""}],[{"start":211.10000000000002,"text":"Shares of AMD, Nvidia’s chief competitor, have meanwhile risen more than 120 per cent in the year to date after it struck major chip supply deals with Meta and OpenAI. "}],[{"start":222.40000000000003,"text":"SoftBank-backed Arm has surged more than 160 per cent on a bold strategic shift into offering its own chips to compete with Nvidia’s, rather than designing the underpinnings of other vendors’ hardware. "}],[{"start":234.65000000000003,"text":"The UK group, which counts Nvidia as a major client, has forecast this pivot will help drive a fivefold increase in revenue over five years."}],[{"start":243.55000000000004,"text":"Memory chip stocks have also been big beneficiaries, as demand from data centres creates a global shortage. Two high-bandwidth memory chipmakers, Micron and SK Hynix, joined the small group of companies valued above $1tn on successive days this week."}],[{"start":258.85,"text":"UBS has said Micron’s stock could more than double over the next 12 months, even after rising about 860 per cent over the past year."}],[{"start":268.45000000000005,"text":"Semiconductor equipment suppliers Lam Research and KLA have also had significant gains. "}],[{"start":274.80000000000007,"text":"“For the moment, you do have demand that is unabated and it is keeping pace with rising prices,” said Nelson Yu, head of equities at AllianceBernstein."}],[{"start":285.3500000000001,"text":"But he warned Big Tech’s vast spending plans would likely be scaled back in the event of a recession, and that even these huge companies may have a price limit."}],[{"start":295.30000000000007,"text":"“This is never as simple as just saying it is a bubble or it isn’t a bubble,” Yu said. “There is real demand creation here. But one of the things to watch out for, like with any commodity product, is that price increases [do] beget demand destruction.”"}],[{"start":316.4000000000001,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779948909_3570.mp3"}