Chip Stock Rout Deepens on AI Debt Jitters, China Competition

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.
This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead, with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily podcast, with Carol Massar and Tim Stenovec on Bloomberg Radio.

**Carol Massar** (0:32)
We mentioned at the top a couple of things certainly on our mind. We've been watching the NASDAQ 100 trading near a correction as the selloff and semiconductor stocks turn a little bit ugly with investors, once again, questioning the amount of money that Big Tech is spending when it comes to AI, and we want to go now to tech.

**Tim Stenovec** (0:49)
Yeah. I'm looking at shares of Micron right now, done more than 9 percent just in today's trade. Sandisk also under pressure.
I want to bring in Mandeep Singh. He's our third anchor of Businessweek Daily.

**Carol Massar** (0:59)
My husband yesterday said, where's Mandeep? He did. He talked to me last night. He's like, where's Mandeep?
All right. All right.

**Tim Stenovec** (1:06)
I get it. The people, me, they're Mandeep.

**Carol Massar** (1:09)
They do.

**Walt Lukken** (1:09)
My dad says the same thing to you, by the way.

**Tim Stenovec** (1:11)
Mandeep is Global Head of Technology Research at Bloomberg Intelligence. The semiconductor trade. I got a note from Tom Thornton earlier today. He says, he closed out. What did he say? He just said, I covered most of my semi-shorts today as well as Tesla.
The shorts are doing pretty well if they short at the right time when it comes to some of these memory names.

**Mandeep Singh** (1:30)
They are, but when you look at the overall SOX index, it's up more than 100 percent in the past three months.
When you have moves like this, there's always points where you will see some consolidation, some sideways movement. Fundamentally, when you look at the earnings that have come so far, and we'll learn a lot more this week, Alphabet pointed to the fact that they are raising the capex. So it's a positive overall for the semiconductor complex. And everyone has talked about how they are supply constraints. So to me, nothing has changed fundamentally, but the market is always looking ahead. They are sniffing for what could go wrong down the line, and that's what you see.

**Carol Massar** (2:17)
I have to say, Mandeep, prepping for this, I think we were like, Mandeep is going to be like, guys, I've answered this question a million times. So when do you, like what would-

**Tim Stenovec** (2:25)
Maybe tomorrow we'll answer it differently after we hear from other companies on Thursday too.

**Mandeep Singh** (2:28)
Yeah, if there is a capex cut, yes.

**Carol Massar** (2:30)
Well, what would possibly say to you, okay, now there is a problem?

**Mandeep Singh** (2:35)
Even if the companies that are reporting don't raise their capex, to me, that's a negative. Because as I've explained this before, that because of the memory price increases, every company has to raise their capex targets just to account for how much the memory prices have gone up. So if they're not raising their capex, that's a sign they're cutting somewhere else.
And to me, that in itself is a negative indicator that, oh, they're holding themselves back. Why is that? Is it because they're not able to train the latest model or there is something more to it?

**Tim Stenovec** (3:12)
Which company do you think will be the first to either hold or cut?

**Mandeep Singh** (3:15)
I mean, Meta, to me, looks like the one where they don't still have a cloud model, although the indications are they are going that route.

**Tim Stenovec** (3:24)
Yeah, we reported that a few weeks ago.

**Mandeep Singh** (3:25)
Yes, and so if they come out and say they already have a customer, they are looking for Anthropic to use their compute, that's a positive sign. I expect them to raise the capex for sure in that scenario. And also, you know, there'll be more details around their own model, the Muse model, because with all this open-rate news this week, and Jensen Huang, you know, coming on X and supporting open-rates, it feels like there is a lot of momentum that suddenly there is behind the Chinese open-source models.
And what that would mean for the overall ecosystem, I think we still have to discern that overall impact.

**Carol Massar** (4:02)
So the AI circular fears, or circular financing fears, is that legit? Should we be a little concerned about that every time we bring up that diagram and see how interconnected things are?