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The share prices of TSMC, Nvidia, ASML and other chip companies have declined sharply. In recent days, investors have been a lot more pessimistic about the prospects of AI hardware. Is the AI hype already weakening, or are the cooled market conditions only temporary?

TSMC and Nvidia plunged 13 percent and 10 percent, respectively, over the past few days, dropping market values by more than $100 billion (TSMC) and $200 billion (Nvidia). At TSMC, the share price drop was triggered after it revised its expectations for earnings in 2024.

Thanks to the AI hype, Nvidia’s value rose from over 300 billion euros at the end of 2022 to 2 trillion euros in March this year. However, compared to its peak last month, it fell 15 percent in value. U.S. chip maker Supermicro fell even harder on Friday. Its market value then dropped 23 percent to just under 40 billion euros.

ASML shares also suffered. After the chip machine maker presented disappointing quarterly figures, CEO Peter Wennink spoke of a “transition year” until additional growth is expected to return in 2025.

Chance of revival

Bloomberg reports that some stock traders are already betting on a rebound in the market, though. Regardless, there is considerably more spending on call and put options. These options allow traders to profit from a rise and fall in the value of stocks, respectively. Last Friday, the number of purchases of these options was 20 percent higher than the average for the previous 20 days.

At Forbes, like Morgan Stanley analysts, they expect Nvidia’s quarterly earnings next month to still deliver strong growth. Although the value per share is now $762, it could well end up above $1,000 next month. That’s looking at the bottom line, but at the previous quarterly earnings presentation in February, Nvidia rose a record 260 billion in a single day.

Still, the AI hype seems to have cooled somewhat by now. In principle, this is actually necessary, since the actual deployment of GenAI at companies has mostly yet to take place. CTO at Dynatrace Bernd Greifeneder already reported on our Dutch-language site that GenAI is at an “advanced stage of the hype cycle.” A combined approach is needed, according to him, where companies combine GenAI with other machine learning tools they may already be using. This may even require a Chief AI Officer (CAIO). Only when that development occurs will there be room again for further growth in the AI market.