Advantest’s CEO has warned that the chipmaker could face a “severe” downturn if data center spending slows. But he sees the potential for AI phones to justify AI investments to support chipmakers. Doug Lefever’s comments to the FT come amid growing concerns about the current pace of AI spending. .
Semiconductor companies will be hurt if Big Tech companies’ spending on data centers slows, the head of one of the largest providers of chip test equipment told the Financial Times. He added that smartphones coupled with artificial intelligence could save the day.
Advantest CEO Doug Lefever said the economic downturn doesn’t have to last long to have a noticeable impact on the industry. He said given the concentration of hyperscalers in the sector, “delays in data center construction will have a significant impact on the supply chain.”
Companies like Microsoft, Amazon, and Meta Platforms are pouring hundreds of billions of dollars into AI infrastructure, causing both excitement and anxiety on Wall Street. By the end of the year, hyperscalers will spend an estimated $222 billion on AI chips and data centers to run emerging technologies.
Spending on AI is expected to continue to soar, but some industry watchers are growing nervous about whether the spike in spending will continue, especially if AI fails to live up to the hype.
flat Salesforce CEO Marc Benioff warned about overspending on AI, calling it “race to the bottom. ” he added. “A lot of companies are making big moves into this kind of public cloud, but I think we need to know exactly how much we’re investing.”
Concerns about overspending caused major semiconductor companies to temporarily slump in performance in September.
There’s good reason why Lefever pays close attention to this area. Enthusiasm for AI is making semiconductors increasingly complex, driving demand for Advantest’s equipment. As a result, the Tokyo-based stock’s ADR has risen 71.32% this year.
“I don’t like to use the word bubble because it implies that it will disappear, but there will be cycles,” Lefever told the FT. “When the next cycle comes… it could be pretty bad.”
But AI smartphones could be the industry’s saving grace, Lefebvre said.
“Everyone is holding their breath waiting for the killer app with AI phones to arrive…If that happens and people start buying new phones, it’s going to be crazy,” he told FT. told.
Wall Street analysts are similarly bullish on AI phones, and that consideration is already percolating into price targets. On Thursday, Wedbush Securities raised its price target on Apple to $325, citing high expectations for Apple Intelligence, an AI software that will be used in new iPhone products.
“This has been a multi-year AI journey, built around next-generation chip architectures, hardware releases, and AI foundations that many consumers will eventually adopt,” said analyst Dan Ives. “This will determine the future of Apple, including future iPhone models.”
