from Nvidia (NVDA) closing of registration Monday comes as AI hardware stocks continue their recent tear fueled by investor enthusiasm over growing demand for artificial intelligence.
Nvidia shares are up 8% over the past week, pushing the chipmaker on the verge of unseating Apple (AAPL) as the most valuable company on Wall Street. The stock market rally follows recent comments from CEO Jensen Huang and the chipmaker’s partners touting an intense need for the company’s AI chips.
Other AI Arm Chip and Hardware Stocks (ARM), Qualcomm (QCOM), Broadcom (AVGO), Super microcomputer (SMCI), Astera Laboratories (ALAB), And Micron (UM) also increased, as companies gave separate guidance on high demand for their products, thanks to the AI boom. TSMC (TSM) the stock also closed at a record high on Monday.
Overall, the PHLX Semiconductor Index (^SOX) is up 4.5% over the past five days, outperforming the S&P 500 (^GSPC), which increased by 2.9% over the same period.
The upward trajectory of AI chip stocks is a positive sign for AI hardware spending that eases Wall Street’s concerns about a near-term investment slowdown.
“While Phase 2 stocks (i.e., AI infrastructure-related stocks, such as Arm, TSMC, and SMCI) appear modestly expensive relative to history, it is possible that demand for AI Leads Mega-Cap Tech Stocks to Spend Even More on AI-Investment Spending That Investors and Analysts Currently Expect,” Goldman Sachs (.GS) write the analysts in their October 10 report.
Google (GOOG), Microsoft (MSFT), Amazon (AMZN), and meta (META) have all indicated that they will continue to spend significant sums on AI infrastructure into next year, benefiting AI hardware companies, led by Nvidia. Overall, large-cap technology companies are expected to spend $215 billion in AI capital spending in 2024 and $250 billion in 2025, according to Goldman Sachs.
OpenAI’s recent $6.6 billion The funding round is also expected to put money in the hands of hardware companies, namely Nvidia, as they continue to evolve their AI models.
JPMorgan (JPM), analyst Harlan Sur forecasts semiconductor industry revenue growth of 6-8% in 2024. “We remain positive on semiconductor and semiconductor equipment stocks “, he said in a recent note to investors, “as we believe the shares should continue to rise. in anticipation of better supply/demand in 2H24/25 and stable/increasing earnings capacity trends in 2H24/25.
But eventually a slowdown in investment will occur. The question is when.
While AI software is typically offered on a subscription basis, the hardware is a one-time sale. Analysts have warned that AI chip stocks are in a bubble this will eventually break out once big tech’s massive spending on AI infrastructure wanes.
Indeed, the latest earnings reports from the tech giants have highlighted a widening gap between their heavy spending on artificial intelligence infrastructure and their return on investment – and tested Wall’s patience Street. Shares of Google, Microsoft and Amazon all fell in late summer following their quarterly financial reports, which reported billions in spending on AI.
“We continue to believe that spending on data center infrastructure will be strong this year and possibly next year,” DA Davidson analyst Gil Luria told Yahoo Finance in an email. “but there will be a possible peak in capital expenditure from hyperscalers, starting next (calendar) year.
Laura Bratton is a reporter for Yahoo Finance. Follow her on X @LauraBratton5.
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