"Chasing Even Equipment"...China's Semiconductor Pursuit Threatens Big Tech AI Investment Boom

▲ China, U.S., Semiconductor, Artificial Intelligence (AI)/AI-generated image

China's technological pursuit and the controversy over circular investment are shaking the AI investment boom among U.S. big tech companies.

Bloomberg reported on July 28 (local time) that China's semiconductor competitiveness has emerged as a new market risk. Despite stringent technology export restrictions, China has boosted its semiconductor production and advanced AI model development capabilities.

China's pursuit is also expected to expand into the semiconductor manufacturing equipment sector. ASML (ASML) holds a monopolistic position in the deep ultraviolet (DUV) and extreme ultraviolet (EUV) lithography equipment markets. Analysis suggests that if China enters this field, the competitive landscape of the global semiconductor equipment market could change.

The controversy surrounding circular trading involving Nvidia (Nvidia, NVDA) also pressured investor sentiment. The structure where companies funded by Nvidia then purchase Nvidia semiconductors again could inflate AI demand, it was pointed out. The panelists stated, “The controversy itself is not new, but the transaction amounts continue to grow.”

The market is closely watching the earnings announcements of major U.S. cloud companies. Alphabet (Alphabet, GOOGL·GOOG) recorded negative quarterly free cash flow for the first time since its listing. A key variable is whether AI capital expenditures and borrowing costs are also pressuring the cash flow of other big tech companies.

The critical point is whether any major tech company will be the first to slow down its capital expenditure. Apple (Apple, AAPL) is not investing hundreds of billions of dollars in the AI race. The panelists assessed that Apple might opt for a strategy of signing cooperation agreements after a winner emerges.

[Article Key Summary]

-China is expected to pursue advancements in the lithography equipment sector, following semiconductors and advanced AI models.

-Concerns are growing that Nvidia's circular investment structure could inflate AI demand.

-Alphabet's first quarterly free cash flow deficit has made the burden of big tech's capital expenditures a key issue for earnings season.

*Disclaimer: This article is for investment reference only and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*