Shares of chip-equipment makers headed for historic losing streaks on Friday, dragged down by concerns about the hot pace of artificial-intelligence spending.
Lam Research fell 3.5% and KLA dropped 2.8%, putting both stocks on pace for their 10th consecutive daily decline. The streaks would be their longest on record. Their shares have plunged 22% and 17%, respectively, over that stretch, according to Dow Jones Market Data.
Applied Materials declined 2.9%. The stock has fallen 22% over the last nine sessions, including Friday, marking its longest losing streak since May 2012.
These companies are big beneficiaries of the AI spending boom because they supply the machinery used to manufacture the advanced chips needed to power data centers and AI systems.
Investors have grown increasingly worried about the financing behind the AI boom, and whether the sky-high spending levels can continue. Those concerns were evident during this month's selloff in bonds issued by CoreWeave, the Nvidia-backed data-center operator.
Yields on some of CoreWeave's bonds surged to levels associated with financial distress, raising questions whether heavily indebted companies can sustain their massive infrastructure investments. Higher borrowing costs could force AI infrastructure developers, like CoreWeave, to scale back expansion plans -- potentially weakening demand for advanced chips and manufacturing equipment needed to support the industry's growth.
Earlier this week, CoreWeave told Barron's its revenue backlog, which reached about $104 billion at the end of the second quarter, should more than support payments for all of its debt obligations.
Hotter-than-expected inflation data earlier this week added to pressure on chip-equipment stocks: The fear is the Federal Reserve might increase interest rates to rein in inflation and drive borrowing costs even higher.
The semiconductor industry is also grappling with growing competition from China, after Chinese memory-chip maker ChangXin Memory Technologies announced advances in next-generation memory technology. That offered a reminder that established chipmakers, including Micron and SK Hynix, could lose market share to Chinese rivals.
However, it's important to remember that demand remains strong for chip-equipment makers.
Applied Materials said earlier this week it expects industry spending on chipmaking equipment to grow faster through 2030 than the previous decade. The company stopped short of providing a spending forecast, citing uncertainty surrounding factory construction, supply chains, and infrastructure financing.
Dutch chip-equipment maker ASML offered another encouraging sign. In its third-quarter earnings report on Wednesday, the company said its customers were seeking to place orders for equipment as far ahead as 2030, with its demand to exceed production capacity in 2027 and 2028.
Even with the recent selloff, shares of Lam Research and KLA remain up about 59% and 41%, respectively, this year. Applied Materials is up 64%.
