The delivery period broke through 19 weeks, and the price recorded the biggest monthly increase. “Chip inflation” may become the next “life and death” for AI trading?

The Zhitong Finance App learned that recently, investment agency Susquehanna said in a recent report that the delivery cycle of the global semiconductor industry was further lengthened in June, and even in the context of rising prices, this trend is still very significant.

The bank's analyst Christopher Rolland pointed out that the semiconductor industry's delivery time in June recorded the biggest monthly increase since the current cycle, increasing by 5 days to 19.4 weeks from month to month. What is more remarkable is that industry pricing experienced the “biggest monthly increase” in June, an increase of 5% over the previous month. Accelerated deliveries coincided with rising prices, highlighting that the chip supply and demand pattern continues to tighten.

Furthermore, delivery growth in June was “broad-based” — around 81% of the companies it covered had flat or rising deliveries, and all distributors experienced growth. Delivery times for all product categories increased month-on-month, which Rolland believes “indicates that the upward cycle is now expanding beyond simulated parts.”

By category, the field of power discrete devices is still tight, and delivery times for power integrated circuits and MOSFETs have risen for more than 10 days. Field programmable gate arrays (FPGAs) are also tight, and Xilinx delivery under Lattice Semiconductor (LSCC.US) and AMD (AMD.US) has been extended for the fifth month in a row by two weeks. The supply of passive components is also being rapidly tightened, and deliveries between VSH.US (VSH.US) and Murata Manufacturing (MRAAY.US) are increasing.

At the corporate level, deliveries of Onsemi Semiconductors (ON.US), Diodes (DIOD.US), Renesas Electronics (RNECY.US), and Japan's Rohm Semiconductor (ROHCY.US) increased dramatically, while Texas Instruments (TXN.US), Microchip Technology (MCHP.US), and Infineon (IFNNY.US) were “generally stable.” SWKS.US (SWKS.US), MaxLinear (MXL.US), and Coherent (COHR.US) also experienced “substantial growth” for more than 10 days.

The semiconductor sector is experiencing a “roller coaster” market, and “chip inflation” may become the next big test for AI trading

In contrast to the continuing tight fundamentals of supply and demand, US chip stocks experienced severe shocks in July. The Philadelphia Semiconductor Index fell about 17% in July, although the increase was as high as 65% during the year. The index fell by about 10% last week, the biggest weekly decline in more than a year. It has retreated more than 20% from its all-time high in June, and has officially entered a technical bear market.

However, behind sharp fluctuations in stock prices, the acceleration of delivery and the rise in prices seem to mean that a deeper structural contradiction is surfacing — “chipflation” (Chipflation).

Julia Hermann, a global market strategist at New York Life Insurance Investment Management, recently warned that “chip inflation” — that is, soaring prices of AI-related logic chips and memory chips — will be the next headwind to test the resilience of AI transactions.

In an interview, she stated, “Hyperscale cloud service providers are now in a dilemma: on the one hand, rising investment costs — rising chip prices, compounded by rising energy and utility costs; on the other hand, it still takes years to realize the return on investment. We believe this environment will truly test the market's belief — as long as investors remain convinced of the long-term potential of AI trading, they may be able to tolerate short-term fluctuations and a slowdown in the pace of monetization.”

Data from the Asian market are supporting this concern. Hermann pointed out that one of the best indicators for observing memory chip inflation is the Korean DRAM export price index. In the past cycle, the year-on-year growth rate of memory chip prices peaked at around 100%, but now, the price of DRAM produced in Korea has risen as much as 370% year over year.

In her opinion, the sharp rise in chip prices is certainly a sign of strong demand, but it is also like a double-edged sword — continued high prices will drastically drive up the construction costs of AI infrastructure, which in turn may curb or even end the current AI capital expenditure boom. Therefore, at present, she mainly focuses on “quality” in the AI supply chain, that is, strong profitability, medium to low profit fluctuations, and sufficient interest coverage.

Choi Tae-won, chairman of the South Korean memory chip giant SK Hynix, also recently issued a warning about chip inflation, saying bluntly that it is not normal for the current memory market to maintain high prices for a long time. He predicts that global semiconductor demand will expand dramatically next year (2027). Among them, demand in the AI field will increase 60% to 100% compared to this year, and overall semiconductor demand will also increase by at least 50% to 60%. However, new supply will be “almost zero” next year, and the gap between supply and demand is likely to widen further.

Choi Tae-won gave an intriguing response to concerns that production expansion might end this “supercycle” early: chip prices are currently at an abnormally high level and should have declined somewhat. If prices continue to rise and “chip inflation” is further intensified, the semiconductor industry will eventually be repulsed. However, he made it clear that increasing supply and driving prices back down does not mean that the company is unprofitable.

As supply and demand continue to be tight and the market fluctuates drastically, the next trend in the semiconductor industry is becoming one of the hottest topics in the global capital market.