AI Smartphone Demand Could Cushion Semiconductor Industry Amid Data Center Spending Concerns

Key Nvidia Supplier Warns AI Spending Slowdown May Trigger 'Vicious' Downturn For Chipmakers - Alphabet (NASDAQ:GOOG), Alphabet (NASDAQ:GOOGL)

Recent concerns have emerged regarding a potential slowdown in artificial intelligence (AI) investments by major U.S. tech giants, which could significantly impact the semiconductor industry. What Happened: Doug Lefever, CEO of Advantest, a leading supplier of chip testing machines for Nvidia Corp. NVDA, has voiced apprehensions about a possible decline in AI spending by prominent U.S. technology firms. Such a downturn could lead to major disruptions in the semiconductor supply chain, Financial Times reported on Friday. Lefever pointed out that companies like Meta Platforms Inc. META, Google by Alphabet Inc. GOOG GOOGL, and Microsoft Corp. MSFT have made substantial investments in data centers. A reduction in their spending could cause significant ripple effects due to the current market concentration. Lefever described the potential downturn as possibly "vicious" due to cyclical market dynamics. Conversely, Lefever noted that demand for AI-enabled smartphones is currently sluggish but could surge if a breakthrough application arises. Such a development could lead to a rapid increase in smartphone replacements, significantly impacting the market. See Also: Peter Thiel Once Said He Would Bet On The Reversal Of Silicon Valley's Math Bias As AI Continues To Rise: 'Isn't That A Long Overdue Rebalancing Of Our Society' Despite these challenges, Advantest remains a dominant player in the semiconductor testing market, with a substantial share and increasing demand for its high-end testing machines. The company has seen its share price soar, driven by the rising complexity and cost of semiconductor chips. Why It Matters: The potential slowdown in AI investment is a critical concern for the semiconductor industry, which heavily relies on the continuous growth of AI technologies. Logan Weaver, CEO of Surmount AI, highlighted at Benzinga's Fintech Deal Day how AI is transforming investment management, and empowering consumers with simplified portfolio management tools. This underscores the growing importance of AI in various sectors. Meanwhile, Jamie Dimon, CEO of JPMorgan Chase & Co., emphasized that AI is not just hype but a real phenomenon with the potential to benefit numerous aspects of life. Read Next: How To Watch NFL Christmas Gameday Live On Netflix With Mariah Carey, Beyoncé And Epic Football Matchups Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors. Image via Shutterstock Market News and Data brought to you by Benzinga APIs

Big Tech's AI Spending Slowdown Could Lead To "Vicous" Slowdown For NVIDIA Says Supplier CEO

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy. A fall in spending by big tech firms on AI products could have serious consequences for the semiconductor industry, warns Doug Lefever, the CEO of Japanese semiconductor test equipment provider Advantech. Lefever shared his thoughts in an interview with the Financial Times, adding that the potential slowdown could be mitigated if consumer AI smartphones gain popularity in the market. AI spending could materialize in cycles, and once the current cycle ends, the industry could experience a shock, believes the executive. The surge in AI spending in 2024 revolved around the capacity to train and test the models through mega data centers. These data centers have reshaped the paradigm for scale and energy consumption and forced big tech firms to consider alternative energy sources, such as nuclear power, for their computing facilities. As a result, most of the spending in the AI industry focuses on data centers and has originated from big technology firms eager to build their computing infrastructure. However, the CEO of the world's largest chip testing equipment provider, Advantech, Doug Lefever, believes that big tech's AI spending could be part of a cycle that could end in a "vicious" bottom before picking up again. In an interview with the Financial Times, Lefever shared that consumers' adoption of AI through their smartphones could help buffer the supply chain against this cyclical downtrend. He added that "may not last long and then it may go right back up," but refrained from comparing current AI spending trends to a bubble since the term "implies that it's [the spending] going to go away." While consumer AI devices are unlikely to use NVIDIA's products, their models and computations should be facilitated through data centers and associated infrastructure that uses the GPUs. While the initial wave of AI smartphone spending has been slow, everyone is "waiting for the killer app with the AI handsets," believes the executive. If this application materializes, then the resulting wave of AI hardware demand could help buffer against any cyclical downtrends in spending by big tech on AI data centers. Even though an AI spending slowdown hasn't crossed many investors' minds in 2024, some quarters have been worried about the impact of competition on chip designer NVIDIA's sales. NVIDIA's Blackwell GPUs, which are the industry leaders in performance, have been in short supply and have commanded high price tags. As a result, big tech has diverted some of its spending away from NVIDIA to rivals like Broadcom and Marvel and towards designing and developing in-house AI processors. NVIDIA, whose shares are up by 859% since the start of 2023, is no stranger to turmoil in the GPU market. Its shares had dropped by 50% between late 2018 and early 2019 after a sluggish Bitcoin market meant that miners started unloading their used GPUs into the market. This impacted the demand for NVIDIA's GPUs which resulted in the firm losing more than $23 billion in market capitalization.

AI Smartphones To Cushion Semiconductor Industry Amid Data Center Uncertainty: Report - Alphabet (NASDAQ:GOOG), Alphabet (NASDAQ:GOOGL)

Declines in data center investment could disrupt the semiconductor supply chain. Demand for artificial intelligence-enabled smartphones could serve as a buffer for parts of the semiconductor industry against a potential slowdown in data center investments, Financial Times cites Doug Lefever, CEO of Advantest, a Japanese supplier of chip testing equipment for Nvidia Corp NVDA. Lefever expressed concern over possible dips in spending by major U.S. tech companies, such as Meta Platforms Inc META, Alphabet Inc GOOG GOOGL Google, and Microsoft Corp MSFT, which have been driving the construction of advanced data centers. Lefever told the FT that while fluctuations in data center spending may not last long, any decline could significantly disrupt the semiconductor supply chain due to its reliance on hyperscalers. Also Read: Broadcom and Netflix Clash Over Patent Disputes Ahead of 2025 Trial He added that the industry's cyclical nature could lead to what he described as "vicious" downturns. However, he remained optimistic about the potential growth of AI smartphones, suggesting that a breakthrough application could rapidly drive consumer demand and spark a wave of handset replacements. Advantest, headquartered in Tokyo, holds over 50% of the semiconductor testing market and has benefited from the rising complexity and cost of chips. Lefever highlighted the growing complexity of chip testing, with Nvidia's latest Blackwell products requiring three to four times longer to test than previous generations, as a key driver of sustained demand for Advantest's solutions. The company's success extends to high-end testing equipment, which costs $1 million per unit and boasts a market share exceeding 60% in specific categories. Despite geopolitical challenges, such as U.S. restrictions on China, Lefever told the FT that increased demand elsewhere quickly offset lost sales in China. He emphasized that Advantest remains well-positioned globally, with operations in 18 countries and a diversified customer base. Apple began introducing its Apple Intelligence features on October 28 with the launch of iOS 18.1, offering initial AI functionalities. The rollout will continue with iOS 18.2, including ChatGPT integration and advanced tools like Visual Intelligence and Genmoji, aiming to boost future sales. Needham analyst Laura Martin expects Apple iPhone to account for up to 96% of the company's 2025 revenue. International Data Corporation (IDC) had reignited confidence in smartphone manufacturers, including Apple, with a new market forecast projecting a 5.8% rise in global smartphone shipments to 1.23 billion units in 2024, recovering after two tough years. The report highlighted increased demand for budget Android smartphones in China and emerging markets and strong adoption of generative AI smartphones in premium markets as key growth drivers. Also Read: HIVE Digital Boosts AI Ambitions With $30 Million Nvidia GPU Deployment Image via Shutterstock. GOOGAlphabet Inc$196.50-0.54%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewGOOGLAlphabet Inc$195.02-0.56%METAMeta Platforms Inc$605.51-0.37%MSFTMicrosoft Corp$437.90-0.33%NVDANVIDIA Corp$138.88-0.96% This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs

AI phones could sustain chip sector if data centre spending slows, says Nvidia supplier

Demand for artificial intelligence-enabled smartphones could help to protect parts of the semiconductor industry from a "vicious" downturn if investment in data centres slows, said the chief executive of the world's largest provider of chip testing machines. Doug Lefever, who leads Nvidia supplier Advantest, said he was watching for any sign of slower spending on AI by big US tech groups. Meta, Google and Microsoft have been heavy investors in data centres that can deliver massive amounts of computing power. A fall-off "may not last long and then it may go right back up, but because of the concentration [of hyperscalers] right now in the market, any slowdown in the data centre buildout is going to have big reverberations in the supply chain", said Lefever. "I don't like to use the word bubble because it implies that it's going to go away, but there will be cycles," he said. "When that next cycle comes . . . it could be pretty vicious." In contrast, demand for AI smartphones was "kind of slow" but could take off rapidly, 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 said. Tokyo-based Advantest, a key supplier of testing equipment for Nvidia's high-end graphics processing units, is one of the companies to benefit most from the rapid rise in demand for semiconductors. The company controls more than half of the semiconductor testing market, and demand for its services has skyrocketed as chips have become more advanced and expensive. That dominance has lifted its share price by more than 80 per cent over the past year and about 500 per cent over a five-year period, with a recent dip in December attributed to fears that incoming president Donald Trump would get tougher on China. While Japan has lost its leading position from the 1980s in chip production, Advantest is part of a cluster of Japanese semiconductor equipment and materials companies that hold dominant market positions in niche yet indispensable parts of the supply chain. A completed advanced chip might now be tested by Advantest machines between 10 and 20 times, according to Lefever, from when the wafer is cut to the assembly of the finished product. Five years ago, that figure was in single digits. Testing times have also been extended, with Nvidia's latest Blackwell product taking three or four times longer to test than the previous generation. This gave Advantest the confidence in October to raise its net income target for the 2024 fiscal year by 16 per cent to ¥122bn ($792mn). The trend of increasing demand for Advantest machines -- which can cost $1mn and have more parts than a commercial aircraft -- is unlikely to abate soon. It has focused on higher-end performance testing and in some categories has over 60 per cent market share, according to analysts. The company is in 18 countries but still draws between 20 and 25 per cent of revenues from China, a level that has fallen recently but with which Lefever says he is comfortable. It has not been directly targeted by US restrictions to curtail China's ability to produce advanced technology, in part because sanctions tend to target the ability to fabricate the chips themselves. Even if China were completely closed off, Lefever expected demand to be healthy enough elsewhere to compensate. When one big company in China was hit by sanctions recently, the lost sales were quickly compensated for by other customers, he said. "We thought it could be a year, and it was months," he said. "It was remarkable."

AI-Powered Smartphones Could Offset a Data Center Downturn | PYMNTS.com

If tech investors cool on data centers, could AI-powered smartphones fill the semiconductor industry's void? Doug Lefever, CEO of Nvidia supplier Advantest -- the world's biggest chip-testing machine provider -- seems to think so, the Financial Times reported Wednesday (Dec. 25). Lefever said demand for phones outfitted with artificial intelligence could help protect the semiconductor sector from a "vicious" downturn in data center spending, per the report. Lefever is watching for any sign of reduced spending on AI by tech giants in the United States, as the likes of Meta, Google and Microsoft invest in data centers that can provide large amounts of computing power, the report said. While a downturn could be short-lived, the market is so concentrated around big companies that "any slowdown in the data center buildout is going to have big reverberations in the supply chain," Lefever said, per the report. "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 said, according to the report. "When that next cycle comes . . . it could be pretty vicious." By contrast, demand for AI-powered phones has been "kind of slow" but could take off rapidly, Lefever said in the report. PYMNTS examined what the future could look like earlier this week in a report on the promise of AI in retail, with AI assistants providing personalization and taking care of up 20% of eCommerce tasks, from product recommendations to customer service. Lars Nyman, chief marketing officer at CUDO Compute, told PYMNTS this week that AI will transform retail next year by predicting consumer behavior with unprecedented accuracy and offering personalization that might seem unsettlingly prescient. "AI-driven personalization will go full Black Mirror in some cases, where your virtual assistant might ask, 'Are you sure you don't need those hiking boots before your Yellowstone trip next month?'" Nyman said. He also predicted AI will help retailers reduce inventory costs by up to 10% through improved demand forecasting, pointing to McKinsey research. But with this enhanced personalization comes challenges. "Consumers will demand transparency on how their data is used," Nyman said, suggesting a renewed debate around data privacy as AI makes shopping more intimate but also possibly more invasive.