SEOUL: Artificial intelligence (AI) executives’ calls to slow development of the technology are likely to weigh on chipmaker and supply-chain stocks in the near term, but will probably have limited long-term impact as spending on computing infrastructure remains strong, market strategists say.
Shares of South Korean memory maker Samsung Electronics Co fell as much as 4.1% early yesterday, while peer SK Hynix Inc slumped 5.8%, as investors assessed whether the more cautious approach to developing advanced models will crimp their earnings.
In Japan, chip equipment maker Advantest Corp dropped 4.7% while storage maker Kioxia Holdings Corp slid 9.3%.
Calls for restraint have grown in the industry, with Anthropic chief executive officer (CEO) Dario Amodei saying on Saturday that the company would introduce additional safeguards, including independent third-party evaluations.
He urged the broader industry to slow the pace of development of their most advanced models. OpenAI CEO Sam Altman backed the proposal, while xAI’s Elon Musk said: “Dario is right.”
Still, with demand for chips, energy and computing power continuing to outstrip supply, any weakness in tech hardware stocks may prove short-lived.
Investors, including Gary Tan, a portfolio manager at Allspring Global Investments in Singapore, are doubtful the latest developments will have long-lasting effects on the industry.
“It may cause some short-term pressure, but it’s unlikely to derail the longer-term AI trade,” Tan said.
“AI development is still at a relatively early stage, and I’m not sure the rest of the ecosystem is willing to accept the current pecking order and slow down while the technology continues to evolve so rapidly,” he added.
Concerns over the vast sums being poured into AI have weighed on technology stocks as investors question whether earnings can justify soaring infrastructure costs.
The scrutiny has left high-valuation shares linked to the technology particularly vulnerable, with signs of increased spending or weaker returns triggering sell-offs.
The tech-heavy Nasdaq 100 Stock index has dropped more than 4% from the record notched in June, while futures fell more than 1% in early Asia hours yesterday.
Some investors argued that a slower pace of AI development could ultimately be positive for the industry by giving companies more time to extract returns from infrastructure already being built.
“The three CEOs agreeing to pace things does not really change the money being spent on chips, power and infrastructure. In fact, it extends the development timeline,” said Billy Leung, an investment strategist at Global X Management in Sydney.
“If commercialisation and adoption keep growing while the pace of new capability eases off a bit, that actually helps the shift from spending money to build things towards making money from what’s already built – for example, monetisation,” he added.
Sentiment towards Asian tech firms was already being challenged as traders firmed bets of a US Federal Reserve rate hike this week and an increase in global borrowing costs this month, threatening to crimp profits.
Tech stock valuations may also come under more scrutiny because they assume not only strong demand but a relentless pace of model development, Charu Chanana, chief investment strategist at Saxo Markets in Singapore, said.
Still, the souring mood is likely to be short-lived with a push for safeguards leading to more investment in cybersecurity and AI monitoring tools, she said.
Memory, networking, cooling and power equipment companies are likely to be protected by projects already in development, Chanana said.
“Demand for computing power and AI adoption does not disappear because additional safeguards are introduced,” she said.
“For investors, responsible development may make the AI opportunity more durable, even if the pace of progress becomes slightly more measured,” Chanana noted. — Bloomberg
