AI boom not shock-proof; chip shortage and weak pass-through weigh: Report - The Economic Times

While the AI boom is supported by strong cash flows, it is not immune to external shocks. According to Nuvama Institutional Equities, semiconductor shortages pose a major risk to the rally, as chip pr... Read original →

The AI frenzy is hitting a hard ceiling in semiconductor supply chains. With advanced wafer capacity concentrated in Taiwan, China and South Korea, geopolitical friction and extended equipment lead times have driven AI chip prices up 2.5x YoY, directly eroding hyperscalers’ free cash flow. Technically, this delays CoWoS adoption and pushes cloud providers toward chiplet-based heterogeneous integration. On the compliance front, U.S. export controls and domestic subsidies distort global capacity allocation, raising EUV access costs for non-U.S. firms. Strategically, NVIDIA may tighten its full-stack ecosystem lock-in, while AMD and Intel accelerate MI300 and Gaudi deployments to capture substitution opportunities. Over the next 12–24 months, capex retrenchment will trigger consolidation—but mirroring the post-2000 internet bust, once AI compute costs normalize, enterprise adoption will surge.