Global Chipmakers Add $200 Billion In Record Rally On AI Frenzy
Global chipmakers saw their market value soar as investors rushed to get exposure to artificial intelligence, the latest sign of a frenetic bull run that is pushing tech stocks to all-time highs.
The Rise of AI: A New Era for Chipmakers
The sector is being swept up by a wave of good news from AI companies, including ChatGPT-owner OpenAI’s record $500 billion valuation on an employee share sale and its pacts with a group of South Korean chipmakers, as well as a report that Intel Corp. is in talks to add Advanced Micro Devices Inc. as a customer.
Market Capitalization Soars
The bullishness has pushed the combined market capitalization of the Philadelphia Stock Exchange Semiconductor Index and a gauge tracking Asia chip stocks up by just over $200 billion in the latest session, according to Bloomberg calculations.
Korean chip stocks were among the biggest gainers on Thursday, surging on the OpenAI deal and sending the Kospi Index to a record high. Shares of SK Hynix Inc. jumped 10%, while Samsung Electronics Co. advanced 3.5%.
Analysts Weigh In: Fear of Missing Out
Analysts say the bull run is being driven by a ‘fear of missing out’, with investors largely dismissing concerns about a bubble developing in the AI sector.
“Tech momentum shows no sign of fading — as if gravity doesn’t exist — with headwinds brushed aside and every AI headline sparking bursts of euphoria,” said Hebe Chen, an analyst at Vantage Markets in Melbourne. “Bubble talk lingers, but it’s FOMO that’s clearly running the show. Momentum looks self-sustaining until upcoming fourth quarter earnings may force the reality check.”
Valuations Reach New Heights
The recent rally has caused a spike in chipmakers’ valuations: Bloomberg’s Asia chip gauge is trading at around 19 times forward earnings estimates while the SOX Index is now trading at 27 times earnings, approaching record highs from 2024.
Since ChatGPT launched the modern AI era, investors have scrambled to get exposure to technology that has the potential to shake-up the global economy. They’ve piled into big infrastructure providers such as chip linchpins Nvidia Corp. and SK Hynix Inc., pushed up valuations of startups like OpenAI and Anthropic, and poured capital into all manner of gear suppliers to the AI boom.
Indian Investors: What to Watch
For Indian investors, the AI frenzy presents both opportunities and challenges. On one hand, the growth of AI could lead to new investment opportunities in the tech sector. On the other hand, the rapid rise of valuations could lead to a bubble, which could burst and lead to significant losses.
Indian investors should keep a close eye on the developments in the AI sector and be cautious of the potential risks. They should also consider diversifying their portfolios to minimize their exposure to any one particular sector or stock.
Conclusion
In conclusion, the global chipmakers’ surge of $200 billion is a significant development that highlights the growing importance of AI in the tech sector. While the bull run may continue in the short term, Indian investors should be cautious of the potential risks and consider diversifying their portfolios to minimize their exposure.
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