On Monday, South Korea’s KOSPI index dropped by over 6%. The index, which includes semiconductor companies like Samsung (SSNLF) and SK Hynix (SKHY), traded near July’s lows. Investors holding Nasdaq (QQQ) companies should watch the sharp downtrend, which started earlier this month, closely.
Investors are growing increasingly suspicious that the AI boom is trading in bubble valuation territory. Last Week, the Financial Times reported that OpenAI’s annualized revenue is around $20 billion lower than those markets expected in September.
Concerns for OpenAI rose after the CEO of technology firm Broadcom (AVGO) said that the AI firm might face AI funding constraints. CEO Hok Tan said that OpenAI operated unprofitably due to heavy spending on model training and computing.
Broadcom is one of many suppliers of custom AI chips for OpenAI. It also provides the chatbot giant with funding arrangements.
KOSPI’s Correction
Fears mounted further on reports that CXMT, a firm in China, made rapid progress in developing memory chips. Currently, SK Hynix, Samsung, and Micron enjoy high profit margins selling high bandwidth memory. Micron, which exited the consumer business by winding down Crucial, still posted margins of nearly 90% in that segment.
Your Takeaway
The chances are low that AI chip names like AMD (AMD), Intel (INTC), or Nvidia (NVDA) would fall by much. Demand far outstrips available supply. Funding for capital expenditure is still easy. Plus, suppliers have orders booked through 2029.
