US semiconductor stocks experienced a decline on Thursday amid concerns over inflation and the financial sustainability of investments in artificial intelligence (AI) infrastructure. Investor sentiment was dampened by fears of persistent inflation and rising borrowing costs, which could impact companies heavily investing in AI technology. Nvidia’s shares dropped by 2%, while Advanced Micro Devices (AMD) saw a 4% decrease, contributing to the broader sell-off in the chip sector.
Memory-chip makers were not immune to the downturn, with SanDisk shares falling 6% following a 5% decline in the previous session. Micron and South Korea’s SK Hynix also saw their shares drop, as competition from Chinese chipmakers intensified concerns about the semiconductor industry’s future. Despite posting strong earnings and benefiting from sustained demand for AI chips, Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, experienced a 4% decline in its shares, highlighting wider market apprehensions.
The prospect of elevated interest rates by the US Federal Reserve looms large, as inflation fears grow. Such a scenario could increase financing costs for companies relying on debt to fund data centers and other AI-related infrastructure, putting additional pressure on businesses in the sector. As a result, AI infrastructure provider CoreWeave faced selling pressure with its shares falling as much as 7% on Thursday, following a significant decline in the previous session.
The current market environment underscores growing investor scrutiny regarding the financial viability of AI-related investments. Despite robust demand for advanced semiconductor technology, higher financing costs and economic uncertainties are weighing heavily on technology stocks, reflecting a cautious outlook among investors.