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AI Chip Stocks Tumble on HBM Slowdown Fears
24 Jun
Summary
- SK Hynix redirects capacity from HBM to higher-margin conventional DRAM.
- Memory stock sell-off linked to profit-taking after parabolic rallies.
- Hawkish rate shifts and high valuations pressure AI chipmakers.
Following a report indicating SK Hynix is moderating its high-bandwidth memory (HBM) expansion, a significant number of AI-related stocks saw declines in afternoon trading. The underlying cause is SK Hynix's strategic shift to reallocate capacity towards conventional DRAM, where margins have notably surpassed those of HBM.
This development occurred against a backdrop of profit-taking, particularly after substantial gains in stocks like Micron, which had risen approximately 300% year-to-date. The market also reacted to a hawkish shift in interest rate expectations, with traders pricing in rate hikes by December. This economic environment increased scrutiny on debt-funded capital expenditures for AI initiatives, especially at current record valuations.
The divergence in stock performance was evident, with memory-focused companies like Micron experiencing steeper drops compared to logic-heavy Nvidia. Analysts from Wedbush viewed the decline as a potential buying opportunity, citing intact enterprise demand for AI technologies.
Individual stocks like NXP Semiconductors and Universal Display also registered significant drops. NXP Semiconductors, known for its stock volatility, experienced an 8.1% decrease. This followed a recent 5.5% gain on news of increased hedge fund interest, highlighting the market's sensitivity to investor sentiment shifts. Hedge fund sentiment towards NXP improved notably in May, with a doubling of long-to-short fund ratios.
