The stock prices of major chip companies, including Nvidia (NVDA), Arm (ARM), and Micron (MU), are down on Thursday after SK Hynix, a supplier for Nvidia, said it was uncertain about semiconductor demand in 2025. SK Hynix’s head of finance, Woo-Hyun Kim, pointed to inventory adjustments and geopolitical risks as reasons for the unclear outlook. This comes after yesterday’s rally in chip stocks, which was driven by news of a massive AI infrastructure project called Stargate. Funded by OpenAI, SoftBank (SFTBY), Oracle (ORCL), and UAE-based MGX, the project looks to speed up the adoption of AI.
Invest with Confidence:
- Follow TipRanks' Top Wall Street Analysts to uncover their success rate and average return.
- Join thousands of data-driven investors – Build your Smart Portfolio for personalized insights.
Interestingly, though, Kim’s comments demonstrate just how differently semiconductors used in consumer products are performing versus those used in data centers for artificial intelligence. Indeed, In a report to investors earlier this year, analysts at Needham explained that 2024 was a mixed year for semiconductor companies. Those that relied on sales to the PC, smartphone, and automotive industries struggled due to weak demand and too much inventory. However, companies that focused on artificial intelligence saw strong demand thanks to the growing need for AI infrastructure.
Despite the uncertainty, SK Hynix expects demand for memory chips used in AI data centers to continue growing due to the investments made by big tech companies. However, analysts warn that the growth in AI revenue may decelerate in 2025, which could close the gap between non-AI and AI chip stocks.
Which Stock Is the Better Buy?
Turning to Wall Street, out of the stocks mentioned above, analysts think that MU stock has the most room to run. In fact, MU’s average price target of $136 per share implies more than 30% upside potential. On the other hand, analysts expect the least from ARM stock, as its average price target of $157.20 equates to a downside risk of 5.2%.
