Customers are signing multiyear deals for chips and more: 'That's not what the front end of a downturn looks like'
Marvell's stock was moving higher after a bruising chip selloff a day earlier.
Artificial-intelligence stocks have stemmed the bleeding, after a selloff on Monday spurred by concerns that major model creators would start taking a more disciplined approach to AI development and spending.
Among notable chip stocks on the rebound Tuesday were Qualcomm (QCOM), Advanced Micro Devices (AMD), Marvell Technology (MRVL) and Arm Holdings (ARM). Shares of Nvidia (NVDA), Intel (INTC) and Micron Technology (MU) were seeing more modest gains.
Meanwhile, shares of server and component makers were on the rise as well, with Dell Technologies (DELL), Ciena (CIEN) and Hewlett Packard Enterprise (HPE) among those climbing.
Even if Anthropic, OpenAI and other leading-edge labs developing frontier AI models ease their progress, Hendi Susanto, a portfolio manager at Gabelli Funds, said "second- and third-tier players will seize the opening to catch up - so demand for AI infrastructure stays high either way."
He noted that growth drivers such as inference, enterprise AI and physical AI are still ahead, and that major AI-infrastructure companies have signaled that demand will likely continue outpacing supply into at least next year.
While semiconductor and semiconductor-equipment stocks are historically cyclical - meaning that they have been beholden to swings in industrywide conditions - "building and ramping new capacity takes years, not quarters," and that should continue to support the AI trade, Susanto said in emailed comments.
Micron and other memory-chip makers have announced plans to add capacity in the next few years to meet surging demand, after being initially reluctant to do so to avoid a supply glut and price collapse.
Susanto added that customers are signing multiyear supply agreements for chips, networking and other hardware, and "that's not what the front end of a downturn looks like."
In his view, a selloff in semiconductor stocks presents an opportunity. For "high-risk, high-reward" areas of the AI trade such as next-generation optical connectivity, returns depend on meeting technology milestones, Susanto said, and that's "why volatility and speculation there are so elevated."
Shares of optical-networking player Arista Networks (ANET) were up 2.2% Tuesday after having fallen almost 6% on Monday, while Coherent shares (COHR) were up 1.8% after shedding almost 13% in the previous session.
-Britney Nguyen
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