Is AI Starting to Crack? What the Semiconductor Selloff Is Signaling

AI is going to reshape the world over the long term. In the near term, there are real issues from an investment standpoint.

A trillion dollars spent, thin revenue so far

Spending on data centers and AI infrastructure has topped a trillion dollars just since 2024. The revenue generated so far is roughly 5 to 10% of that. Meta, Amazon, and Microsoft have all invested heavily in the buildout, and some have pulled back on usage.

AI does not run without semiconductors

None of this works without chips. The semiconductor index ran up well over 100% in about three months and has since given back a chunk of it. In South Korea, two companies make up over half the entire stock market. One of them, SK Hynix, is the number one chipmaker in the world, and its stock is down close to 50% in a matter of weeks. Weaker demand for semiconductors typically points to reduced infrastructure spend.

Where it leaves the market

A large amount of spend, thin near-term revenue, a semiconductor selloff, and a sharp drop in the world's largest chipmaker. The market is starting to price in that some of these companies are overvalued. None of this changes AI's long-term trajectory. It is a near-term question of price and timing.