Investor concerns are growing that the enthusiasm surrounding AI-related companies may be diminishing, following sharp falls in the value of chip makers.
Over the last month, shares in Korean chip makers SK Hynix and Samsung have fallen by 46% and 35% respectively. US companies Micron and Intel have also experienced declines of 28% and 35% since last month.
Leading tech investor Eileen Burbidge noted that "The AI bubble hasn't burst but it's letting out air," attributing this to various factors within the AI ecosystem. One trigger for the recent falls was a reported breakthrough by a Chinese company in chip manufacturing, which could increase China's self-sufficiency in chip design and production.
Concerns also persist that major AI companies, including Meta, Alphabet, OpenAI, and Anthropic, may struggle to generate sufficient revenue from end-users to justify the substantial investments in chips and data centres. Meta shares are down 15% over the last month, while SpaceX shares have fallen 14% from its IPO debut and nearly 50% from its June peak.
Conversely, Apple, which has largely not participated in the AI arms race, saw its shares rise 21% over the last month, reclaiming its position as the world's most valuable company from chip maker Nvidia. London's FTSE 100 index, which lacks major tech companies, briefly reached a record high on Wednesday morning.
Despite the recent downturns, Eileen Burbidge remains positive, highlighting that those who invested in chip makers a year ago are currently in a strong position, with Samsung and SK Hynix shares up threefold and fivefold respectively over the past year. However, investors are now scrutinising company spending plans and payback projections with increased caution.