Investors question sustainability of AI spending as Chinese competition and valuation pressures mount ahead of Intel earnings.
Semiconductor stocks led broader market declines last week, with the VanEck Semiconductor ETF (SMH) falling 9% over the past month amid rising concerns over AI capital expenditure growth. The S&P 500, NASDAQ, and Dow posted weekly losses of 1.6%, 2.9%, and 0.9%, respectively, as chip stocks dragged down performance.
UBS projects hyperscalers’ AI capex growth will slow to 25% next year and 6% in 2028, following a peak of 76% in 2026. Competition from cheaper Chinese AI models, including Moonshot AI’s latest offering, has intensified worries about revenue sustainability and valuation pressures in the sector.
Intel (INTC) remains caught in the downturn, with investors awaiting its Q2 earnings report for signs of resilience amid the sector-wide pullback. The stock has underperformed peers as concerns over AI spending and competition persist.