AI chip trade remains structurally undersupplied
Dan Ives of Wedbush argued that the AI chip trade remains highly attractive due to a massive supply-demand imbalance that will take up to two years to reach equilibrium.
The argument
He noted that demand-to-supply ratios for AI chips are currently around 12-to-15 to 1, and supply-chain checks in Taiwan and Korea show no cracks in the armor. This suggests the AI build-out is only in its early stages, specifically the 'third inning' of the cycle.
The thesis, stress-tested
✓ What validates it
- ✓Micron's upcoming quarterly earnings beating expectations
- ✓Sustained high gross margins in upcoming semiconductor earnings reports
▸ Risks discussed
- ▸Potential pricing pushback from buyers over time
- ▸Margin compression as tech giants develop in-house chips
Hear it yourself
"At what point do you start to see those margins really compress? Look, I think right now, if there's a pressure point, you probably don't see that for another nine, twelve months. But just like you said, like, competition's coming across the board. It's an arms race, you know, really, when you think from what Meta's doing to Amazon to Microsoft. You you have software companies, and now they'll start to produce chips. Look what's happened even on the Intel side with Apple. So that will definitely start to pressurize the situation. But in my view, it just continues to be, like, we are still so early relative to the build out, and that's also why you're gonna have these gut check moments."
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