Chip stocks slide after Broadcom boss likens AI investing to ‘casino’

Shares in semiconductor companies fell on Tuesday after the boss of Broadcom compared many AI investors to “casino” gamblers, and Chinese memory chip maker CXMT said it had made good progress on a new chip architecture.

South Korea’s benchmark Kospi index tumbled 6.25% as investors dumped chip stocks, while other Asian markets were also lower. Japan’s Nikkei fell 1.8% and the Taiwan exchange lost almost 2%, with the country’s chip maker TSMC down by a similar amount.

Samsung Electronics shares dropped 7.4% on the South Korean exchange, while the memory chip maker SK Hynix was down 10%.

In Japan, the chip equipment maker Tokyo Electron fell 7.15% while SoftBank Group, an OpenAI investor, lost 8.5%.

US stock futures point to a mixed open on Wall Street after the technology-heavy Nasdaq composite slipped 0.4% on Monday. The US chip maker Micron Technology slid 3.9% while Nvidia, Advanced Micro Devices and Broadcom also fell. Crude oil prices dropped amid escalating tensions in the Middle East.

AI shares have been on a rollercoaster in recent months, amid concerns that companies are spending eye-watering amounts on AI infrastructure, funded by debt.

The latest sell-off came after the South China Morning Post reported on Monday that CXMT had made good progress on new Dram architecture that would boost memory density. Investors are worried that it could challenge Samsung, SK Hynix and Micron, the world’s biggest memory chip makers.

CXMT, which had an impressive debut on the Shanghai stock market in late July, makes Dram chips, which store the data that other AI chips draw on for their calculations.

Hock Tan, the chief executive of the US chip maker Broadcom, said the AI boom had attracted investors that do not really understand what they are betting on.

“A lot of investors have no clue what they are investing in,” he said at a conference in Singapore, in comments reported by Bloomberg. They “set very extreme expectations only to find out that it’s almost like they are in a casino”.

AI companies such as ChatGPT maker OpenAI are still loss-making. Tan said OpenAI’s annualised revenues of $50bn (£38bn) at the end of September suggested a viable business model but offered little guarantee on long-term profitability.

“For now it’s still losing money because they’re spending a lot on training,” Tan said. “So frankly, it doesn’t tell anything at this point except that there is a lot of potential revenue growth out of providing frontier generative AI models.”

He noted that a sizeable portion of AI labs’ enterprise revenue came from pilot projects. “When you are a kid you go to a video arcade, you play,” he said. “Your parents give you $10 of tokens, you finish it in 10 minutes and you haven’t learned anything.”