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Underneath the AI optimism lurks some troubling trends for the chip sector


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Underneath the AI optimism lurks some troubling trends for the chip sector

The semiconductor industry is experiencing a dramatic bifurcation, with shares of AI-focused chipmakers soaring while those tracking traditional markets struggle. Popular semiconductor funds like the VanEck Semiconductor ETF and iShares Semiconductor ETF are up 9% this year, driven by gains in AI powerhouses like Nvidia , Broadcom, and Arm Holdings . Yet, the AI chip narrative isn’t as comprehensive as it seems. SOXX 1Y mountain iShares Semiconductor ETF (SOXX) Citi Research projects AI will only account for 30% of chip sales by 2025. Taiwan Semiconductor ‘s recent earnings call epitomized this divide: while projecting AI revenues to double in 2025, they’re seeing minimal recovery in other markets. Analog chip makers like Analog Devices , NXP Semiconductors , and Texas Instruments face prolonged demand weakness, particularly in automotive and industrial sectors, according to JPMorgan analysts. They anticipate a more balanced supply/demand profile emerging in the second half of 2025. The sentiment was evident at the CES show to start the year, where companies like ON Semi , Mobileye and Microchip warned of continued market challenges. The smartphone and PC markets mirror this stagnation. SK Hynix recently warned of demand declines in smartphones and PCs, with growing ******** competition. Oppenheimer remains skeptical about Windows 11 and AI PCs driving meaningful upgrades. Given their exposure to the space, Intel , AMD , and Qualcomm could remain caught in this cyclical downturn. Bottom Line: The semiconductor landscape is sharply divided. AI chips are flying high, while traditional chip sectors are struggling to find lift. While not a wholesale transformation, this trend reveals a significant market segmentation driven by artificial intelligence’s expanding technological footprint.



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#optimism #lurks #troubling #trends #chip #sector

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