AI jitters grow, but spending rolls on

TO say technology stocks went through a roller-coaster ride this week is an understatement.

Fresh volatility continues to rock the artificial intelligence (AI) investment boat as investors grapple with fears that the AI boom may turn into a bubble.

This week’s selling pressure appears to be another manifestation of those anxieties, amplified by fresh developments in China’s semiconductor industry and renewed concerns over US interest rates and inflation.

Reports that China’s state-backed ChangXin Memory Technologies (CXMT) has made a breakthrough in next-generation memory-chip architecture, potentially putting it ahead of established rivals Samsung Electronics and SK Hynix in a key technological area, have rattled semiconductor stocks.

CXMT claims to have made significant progress in developing memory-chip technology that could rival, or even surpass, that of industry heavyweights Samsung Electronics and SK Hynix in certain areas, despite restrictions on its access to advanced chipmaking equipment from Dutch giant ASML.

While the claims remain unverified, the development has raised concerns over intensifying competition and the longer-term pricing power of established memory-chip manufacturers.

Meanwhile, inflationary pressures and concerns over elevated US interest rates have weighed on technology valuations, with the ripple effects extending to Bursa Malaysia’s technology counters.

Yet, despite the nervousness, the latest bout of volatility looks more like another temporary setback than a fundamental reversal of the AI investment cycle.

For one, major industry players continue to commit substantial capital to AI-related infrastructure and technology.

Applied Materials this week announced plans to more than double its research and development and manufacturing capacity by 2030, alongside the unveiling of a US$5bil semiconductor research facility in Silicon Valley, underscoring its confidence in sustained AI-driven demand.

Meanwhile, SoftBank’s bond fundraising to finance further AI investments signals that investor appetite for the technology is still robust.

Certainly, questions surrounding stretched valuations, monetisation and the sustainability of AI spending deserve scrutiny.

Not every company riding the AI wave will emerge a winner, and competitive disruptions could reshape industry profit margins.

Nevertheless, the broader investment narrative remains supported by tangible capital expenditure and expanding technological applications.

For Malaysian technology stocks, which remain sensitive to global semiconductor sentiment, volatility may persist.

But unless there is a meaningful slowdown in AI-related spending, the latest selloff may ultimately prove to be another minor blip in a longer-term growth story.