The world’s largest tech firms show no signs of easing up on artificial intelligence (AI) spending, a record wave that’s propelling hardware providers like Samsung Electronics Co and SK Hynix Inc. That is even as doubts persist about the staying power of AI demand to justify all that capital.
Meta Platforms Inc on Wednesday revealed ambitions to spend as much as US$135 billion this year — one of the biggest planned outlays of the business sphere. Its suppliers have responded in kind: Yesterday, SK Hynix said it plans a “considerable increase” in capital expenditure, and Samsung said it is ratcheting up spending on its memory production capacity.
Meta, Microsoft and fellow hyperscalers such as Amazon.com Inc and Alphabet Inc, are driving a wave of global spending on chips, servers and computers that’s firing up hardware suppliers around the world, particularly in Asia. A procession of industry linchpins’ results this week further underscored how voracious the appetite for AI hardware has grown — and how that’s likely to extend well into this year.
Photo: Qilai Shen, Bloomberg
Ratcheting spending by hyperscalers reflects growing use cases for AI, CLSA Securities Korea Ltd research head Sanjeev Rana said, adding that “the companies are spending real money on real stuff.”
“We are in unchartered territory in terms of valuations, share prices, the demand cycle,” he said. “Everything is unprecedented.”
At the same time, that enormous demand is worsening a global chip demand-supply imbalance that threatens to disrupt industries from smartphones and electronics to car-making.
While the appetite for Nvidia and Advanced Micro Devices Inc accelerators needed to develop and operate AI has long outstripped supply, investors are growing increasingly concerned about a similar deficit in more basic memory.
Memory supply cannot keep pace with demand, SK Hynix’s DRAM marketing head Park Joon-deok said on a conference call yesterday. “Most customers are struggling to secure memory volumes and are persistently demanding increased supply.”
The availability of semiconductors will be a big bottleneck to growth for companies including Tesla Inc, and may necessitate building a Tesla TeraFab — a factory that can make logic and memory chips and provide packaging, chief executive officer Elon Musk said in a recent podcast with X Prize Foundation founder Peter Diamandis.
“We’re going to hit a chip wall if we don’t do the fab,” Musk said. “We’ve got two choices: hit the chip wall or make a fab.”
Tesla will spend US$20 billion this year on pursuits including AI, self-driving vehicles and robotics and plow another US$2 billion into Musk’s xAI start-up.
Memory manufacturers are reallocating production lines toward lucrative high-bandwidth memory (HBM) to satisfy the needs of AI data centers. Because HBM requires about three times the wafer capacity of standard DRAM for the same amount of memory, this shift has reduced supply for the consumer electronics industry. The resulting shortage is threatening double-digit price hikes for PC makers and smaller electronics companies.
Even while companies are spending hundreds of billions of dollars on data centers, concerns about the strength of end-demand for AI persist, however. Microsoft’s capital expenditure grew a larger-than-anticipated 66 percent in the quarter, but its Azure cloud-computing unit posted a 38 percent revenue gain — one percentage point slower than the prior three months.
On the other hand, Meta chief Mark Zuckerberg talked about “a major AI acceleration” that’s been brewing within the tech industry for over a year. “I expect our first models will be good, but more importantly, we’ll show the rapid trajectory that we’re on,” he said on Wednesday’s earnings call.
In Asia, attention is on the race for leadership in next-generation HBM4, which is set to be integrated with Nvidia’s upcoming flagship Rubin processors. Samsung plans to start shipments of its next-generation HBM4 next month — a key step in its bid to catch up with SK Hynix in the lucrative segment. Samsung is close to obtaining certification from Nvidia for the latest version of its AI memory chip.
Shares of contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) came under pressure yesterday after a report that Apple Inc is looking to shift some orders from the Taiwanese company to Intel Corp. TSMC shares fell NT$55, or 2.4 percent, to close at NT$2,235 on the local main board, Taiwan Stock Exchange data showed. Despite the losses, TSMC is expected to continue to benefit from sound fundamentals, as it maintains a lead over its peers in high-end process development, analysts said. “The selling was a knee-jerk reaction to an Intel-Apple report over the weekend,” Mega International Investment Services Corp (兆豐國際投顧) analyst Alex Huang
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is expected to remain Apple Inc’s primary chip manufacturing partner despite reports that Apple could shift some orders to Intel Corp, industry experts said yesterday. The comments came after The Wall Street Journal reported on Friday that Apple and Intel had reached a preliminary agreement following more than a year of negotiations for Intel to manufacture some chips for Apple devices. Taiwan Institute of Economic Research (台灣經濟研究院) economist Arisa Liu (劉佩真) said TSMC’s advanced packaging technologies, including integrated fan-out and chip-on-wafer-on-substrate, remain critical to the performance of Apple’s A-series and M-series chips. She said Intel and Samsung
TRANSITION: With the closure, the company would reorganize its Taiwanese unit to a sales and service-focused model, Bridgestone said Bridgestone Corp yesterday announced it would cease manufacturing operations at its tire plant in Hsinchu County’s Hukou Township (湖口), affecting more than 500 workers. Bridgestone Taiwan Co (台灣普利司通) said in a statement that the decision was based on the Tokyo-based tire maker’s adjustments to its global operational strategy and long-term market development considerations. The Taiwanese unit would be reorganized as part of the closure, effective yesterday, and all related production activities would be concluded, the statement said. Under the plan, Bridgestone would continue to deepen its presence in the Taiwanese market, while transitioning to a sales and service-focused business model, it added. The Hsinchu
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has approved a capital budget of US$31.28 billion for production expansion to meet long-term development needs during the artificial intelligence (AI) boom. The company’s board meeting yesterday approved the capital appropriation plan for purposes such as the installation of advanced technology capacity and fab construction, the world’s largest contract chipmaker said in a statement. At an earnings conference last month, TSMC forecast that its capital expenditure for this year would be at the higher end of the US$52 billion to US$56 billion range it forecast in January in response to robust demand for 5G, AI and
RSS