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Advantest’s CEO warned that chipmakers could face a ‘vicious’ downturn if data-center spending slows.
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But he sees AI phones potentially justifying the AI investments propping up chipmakers.
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Doug Lefever’s comments to the FT come amid growing concerns about the current pace of AI spending.
Semiconductor companies will suffer if Big Tech‘s spending on data centers slows, the head of the largest provider of chip-testing equipment told the Financial Times. Artificial intelligence-linked smartphones could save the day, he added.
According to Advantest CEO Doug Lefever, the downswing wouldn’t have to last long to have a pronounced effect on the industry. Given the concentration of hyperscalers in the space, he said, “any slowdown in the data center buildout is going to have big reverberations in the supply chain.”
Firms such as Microsoft, Amazon, and Meta Platforms have poured hundreds of billions of dollars into AI infrastructure, generating both excitement and apprehension on Wall Street. By the end of the year, hyperscalers will have spent an estimated $222 billion on AI chips and data centers to run the emerging technology.
Although AI spending is projected to keep surging, some industry watchers have grown anxious about whether the spending spree can last — especially if AI doesn’t live up to the hype.
Even Salesforce CEO Marc Benioff has warned about overspending on AI, which he described earlier this month as a “race to the bottom. ” He added, “While there is a big movement of a lot of companies into these kind of public clouds, I think that we have to be careful exactly how much we’re investing.”
Overspending fears briefly dented the performance of key semiconductor companies in September.
Lefever has good reason to pay close attention to the space: Enthusiasm for AI has made semiconductors increasingly complex, boosting demand for Advantest’s equipment. ADRs on the Tokyo-based stock are up 71.32% this year as a result.
“I don’t like to use the word bubble because it implies that it’s going to go away, but there will be cycles,” Lefever told FT. “When that next cycle comes . . . it could be pretty vicious.”
AI smartphones, however, could prove the industry’s saving grace, Lefever said.
“Everyone is holding their breath, waiting for the killer app with the AI handsets . . . if that happens and people start replacing their phones, it’s going to be crazy,” he told FT.
Wall Street analysts are equally bullish over AI phones, a consideration already seeping into price targets. On Thursday, Wedbush Securities raised its target on Apple to $325, citing high expectations over Apple Intelligence — an AI software accessible on new iPhone products.
