Chip Stocks Are Crashing— but This Analyst Says AI Chip Demand Still Outpaces Supply Until At Least 2028: 'You Just Don't Have The..'
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Wolfe Research senior analyst Chris Caso said Wednesday that memory suppliers and foundries remain unable to produce enough AI chips to meet demand, keeping the semiconductor industry constrained by capacity rather than excess supply.
Physical Constraints Continue To Limit Chip Supply
Speaking on CNBC following SK Hynix Inc.‘s (NASDAQ:SKHY) second-quarter earnings and the recent selloff in semiconductor stocks, Casso said memory manufacturers remain supply constrained, while Taiwan Semiconductor Manufacturing Co. Ltd. has effectively sold out its advanced manufacturing capacity.
“You just don’t have the physical space to make the semiconductors right now,” Casso said.
He added that the industry’s current capacity constraints make an oversupply scenario unlikely before 2028.
“Even the potential of getting to that oversupply situation is really 2028 at the very earliest,” he said, adding that semiconductor equipment vendors believe “it could push farther than that.”
Financing Has Emerged As Another Constraint
Casso said financing has also become a bottleneck for AI infrastructure expansion, making chipmakers’ efforts to support the broader ecosystem increasingly important.
He added that Nvidia Corp.‘s (NASDAQ:NVDA) investments in suppliers and AI companies help expand capacity, but drew a distinction between equity investments and reported financing backstops for customers.
“That part I’m less comfortable with,” Casso said, referring to financing guarantees that could create future liabilities despite Nvidia having the best balance sheet in the industry.
Semiconductor Selloff Follows AI Spending Concerns
The semiconductor stocks have come under pressure this month amid growing investor concerns over AI spending, following a sharp rally earlier this year.
iShares PHLX SOX Semiconductor Sector Index Fund (NASDAQ:SOXX) retreated 27.43% in July. The fund has returned 48.24% so far this year and 87.54% over the past year.
The VanEck Semiconductor ETF (NASDAQ:SMH), which holds chipmakers including Nvidia, Micron Technology Inc. (NASDAQ:MU), Advanced Micro Devices Inc. (NASDAQ:AMD), Broadcom Inc. (NASDAQ:AVGO) and Intel Corp. (NASDAQ:INTC), has lost 23.12% this month. Shares are up 24.97% year-to-date and 35.07% over the past year.
Price Action: SOXX closed 5.38% lower on Wednesday at $465 and rose 1.30% in early pre-market trading on Thursday.
Benzinga edge rankings show SOXX has a Momentum score in the 92nd percentile, despite a negative short and medium-term price trend. The fund maintains a positive long-term price trend.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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