Despite calls for an AI slowdown, sustained infrastructure spending by big tech could lead to its continued growth, according to a tech fund manager.
Even if leading AI labs such as Anthropic and OpenAI decelerate their progress, “second- and third-tier players” will seize the chance to level up, maintaining high demand for AI infrastructure, said Hendi Susanto, a portfolio manager at Gabelli Funds, MarketWatch reported. Susanto highlighted that growth catalysts like inference, enterprise AI, and physical AI are still on the horizon. The investor added that top AI-infrastructure firms have signaled that demand is likely to outstrip supply at least until next year.
Despite the traditionally cyclical nature of semiconductor and semiconductor-equipment stocks, Susanto asserted that building and scaling new capacity takes years, not quarters, which should continue to bolster the AI trade.
Susanto also noted that customers are signing multi-year supply agreements for chips, networking equipment and other hardware, indicating that the industry may not be heading toward a downturn. “That’s not what the front end of a downturn looks like,” he said.
He sees any selloff in semiconductor stocks as a potential opportunity, especially in higher-risk, higher-reward areas of the AI trade such as next-generation optical connectivity. “That’s why volatility and speculation there are so elevated,” he said.
Chip Stocks Bounce Back On Tuesday
AI stocks recovered Tuesday after a Monday selloff driven by concerns that major AI model developers could take a more disciplined approach to development and spending.
Among notable chip stocks, Qualcomm Inc. (NASDAQ:QCOM), Advanced Micro Devices Inc. (NASDAQ:AMD) and Marvell Technology Inc. (NASDAQ:MRVL) closed higher by 4.25%, 2.19%, and 1.32%, respectively. Nvidia Corp. (NASDAQ:NVDA) and Micron Technology Inc. (NASDAQ:MU) posted more modest gains, while Intel Corp. (NASDAQ:INTC) declined about 0.05%. Optical networking-focused Arista Networks Inc. (NYSE:ANET) rose about 2.68%, while Coherent Corp. (NYSE:COHR) climbed nearly 1.75% on Tuesday.
AI Safety Concerns Add To Market Risks
Portfolio manager Susanto’s comments come as a sharp contrast to warnings from Citigroup analysts about potential safety concerns around AI that could impact corporate earnings. The strategists warned that a slowdown in AI development could hurt EPS revisions, while November midterms, rising bond yields, and higher oil prices add risks for stocks. They also flagged AI safety concerns as a potential drag on investor enthusiasm, particularly for power-generation and data-center companies.
Furthermore, veterans of ‘The Big Short’ trade — Steve Eisman, Vincent Daniel, and Porter Collins have cautioned that the AI boom could result in a ‘boom, bust’ cycle, with technology revenue relying on a small fraction of buyers, thereby posing risks for chip suppliers and hyperscalers funding the infrastructure. Eisman raised concerns about concentration risks in the AI supply chain. He said Nvidia’s top five direct customers accounted for 70% of its accounts receivable, while Anthropic and OpenAI reportedly generate about 70% of hyperscalers’ AI revenue.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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