According to reports, Qualcomm (QCOM.US) and Broadcom (AVGO.US) shares have become the market's focal point following reports that ByteDance is close to reaching an agreement to purchase custom AI chips for data centers from Taiwan's MediaTek.
MediaTek will supply ByteDance with application-specific integrated circuits (ASICs), a type of chip designed specifically for particular computing tasks. MediaTek is a major supplier of Google's Tensor Processing Units (TPUs). This deal sends a competitive signal to Qualcomm and Broadcom.
Earlier this year, ByteDance agreed to purchase millions of AI chips from Qualcomm, and this agreement would give MediaTek a stronger foothold in a market where Broadcom has already established a deep presence. If ByteDance shifts more AI workloads toward custom ASICs and reduces its reliance on GPUs, NVIDIA (NVDA.US) could also come under pressure, even though US export restrictions on advanced chips have already forced Chinese companies to seek alternatives.
ASIC Chip Market Growth and Global Chip Stock Selloff
As AI companies seek alternatives to general-purpose GPUs, demand for ASICs continues to grow. Major cloud service providers such as Amazon and Google, along with AI developers, are increasingly investing in self-developed chips to reduce costs.
Reports indicate that ByteDance is considering capital expenditures of up to $70 billion this year, more than double last year's total, to build out AI infrastructure. MediaTek is expected to generate approximately $2 billion in AI chip sales this year and aims to capture a 15% share of what is projected to be an $80 billion market next year.
Global semiconductor stocks extended their declines on Thursday. Higher-than-expected US inflation data intensified interest rate concerns, compounding market worries about AI spending and intensifying competition from China.
The iShares Semiconductor ETF (SOXX.US) fell for a seventh consecutive trading session on Wednesday, dropping another 1.7% overnight; South Korea's Kospi index plunged more than 7% on Thursday, led by declines in Samsung and SK Hynix.
Qualcomm, Broadcom, and NVIDIA continued their declines in pre-market trading. On Stocktwits, retail sentiment toward Qualcomm was "bearish," while sentiment toward Broadcom and NVIDIA was "extremely bearish."
One trader wrote: "NVIDIA, all I can say is the stock market is too fickle. Today NVIDIA is changing the world, tomorrow the world is going bankrupt. The level of manipulation is unbelievable. The narrative doesn't change over weeks—it changes within days."
Year-to-date, Qualcomm shares are up 2.5%, Broadcom is up 0.5%, and NVIDIA is up 19%.
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