Semiconductor Shares Drop; SOXL Falls 5%; AMD Declines 4%; Broadcom Drops 3%; Nvidia Down 1%

Tiger Newspress
03-27

Semiconductor shares fell in Thursday trading. SOXL fell 5%; AMD fell 4%; Broadcom fell 3%; TSMC, Intel fell 2%; Nvidia fell 1%.

Microsoft Corp. has walked away from new data center projects in the US and Europe that would have amounted to a capacity of about 2 gigawatts of electricity, according to TD Cowen analysts, who attributed the pullback to an oversupply of the clusters of computers that power artificial intelligence.

The analysts, who rattled investors with a February note highlighting leases Microsoft had abandoned in the US, said the latest move also reflected the company’s choice to forgo some new business from ChatGPT maker OpenAI, which it has backed with some $13 billion. Microsoft and the startup earlier this year said they had altered their multiyear agreement, letting OpenAI use cloud-computing services from other companies, provided Microsoft didn’t want the business itself.

Microsoft’s retrenchment in the last six months included lease cancellations and deferrals, the TD Cowen analysts said in their latest research note, dated Wednesday. Alphabet Inc.’s Google had stepped in to grab some leases Microsoft abandoned in Europe, the analysts wrote, while Meta Platforms Inc. had scooped up some of the freed capacity in Europe.

“Thanks to the significant investments we have made up to this point, we are well positioned to meet our current and increasing customer demand,” a Microsoft spokesperson said in a statement, adding that the company last year added more capacity than in any other year in its history.

“While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions,” the spokesperson said. “This allows us to invest and allocate resources to growth areas for our future.”

Microsoft says it remains on track to spend about $80 billion building out AI data centers in its fiscal year that ends in June. Executives have said the pace of growth should slow in the company’s next fiscal year. After a frantic expansion to support OpenAI and other artificial intelligence projects, the company expects spending to shift from new construction to fitting out data centers with servers and other equipment.

Spokespeople for Meta and Google didn’t immediately comment Wednesday on the research note.

Earlier this week, Alibaba Group Holding Ltd. Chairman Joe Tsai warned of a potential bubble in data center construction, saying new projects may exceed demand for AI services.

“We continue to believe the lease cancellations and deferrals of capacity points to data center oversupply relative to its current demand forecast,” TD Cowen analysts Michael Elias, Cooper Belanger and Gregory Williams wrote.

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