Are Companies Reducing AI Spending? Chip Orders Say Otherwise
Key takeaways
- Chip stocks are under pressure from sentiment, but underlying demand and order flow point to a resilient cycle.
- SOXX fell 11.8% last week
- AMAT down 19.3%
- LRCX down 17.2%
What happened
The iShares Semiconductor ETF slid 11.8% last week and has fallen for nine straight days, its longest losing streak since 2006. Chip‑making and memory companies saw sharp drops: Applied Materials fell 19.3%, Lam Research (LRCX) 17.2% and Micron (MU) 14.6%. Despite fears that corporate AI spending is shrinking, analysts say the chip sector is still in a strong cycle, with AI infrastructure demand remaining high and equipment orders already booked for several years ahead.
Why it matters
Investors are weighing the narrative that AI budgets are tightening against evidence that chipmakers are still selling out. Bank of America’s Vivek Arya argues that the sector’s forward earnings multiples (≈13×) are comparable to post‑dot‑com levels, yet utilization is near full and rental rates for Nvidia GPUs are…
Short-term and longer-term
Short-term. Over the next few days, watch SOXX and the individual chip names for any further technical breakouts or reversals.
Longer-term. For the coming months, the key question is whether AI monetization will catch up to the rapid rise in capital spending.