Key Points
- Despite AI achieving record revenue, the stock price of AMD still fell by 13%.
- NVIDIA falls 6%, semiconductor sell-offs accelerate
- Nasdaq falls 3.6%, concerns over data centers intensify
According to reports from The Associated Press, as stocks in the artificial intelligence sector were once again sold off, the strong post-election gains on Wall Street were wiped out. On November 5th, the stock price of Advanced Micro Devices ( AMD ) plummeted by 13.1%, and NVIDIA's stock price fell by 6.3%.
The Nasdaq Composite Index fell by 3.6%, and the S&P 500 Index fell by 2%. AI Cloud infrastructure companies CoreWeave tumbled another 10%, highlighting that companies related to data center expansion are facing an increasingly widespread pullback.
AMD Stock Price Plummets Despite 97% Growth in Data Center Revenue
The decline of AMD is particularly noteworthy, as the company has recently announced record-breaking financial results.
In the financial report released on November 3rd, AMD announced that its revenue for the third quarter was $13.4 billion, a year-on-year increase of 45%; among this, data center revenue soared by 97% to $8.55 billion.
The adjusted earnings per share are $2.09, representing a 74% increase from the previous year. Management also expects revenue in the fourth quarter to be around $17 billion, indicating that the demand for their AI processors continues to be strong.
These results initially drove the stock price of AMD higher, but as investors re-evaluated the valuation of semiconductors, market enthusiasm quickly faded.
This downward trend indicates that strong financial performance alone may no longer be sufficient to support the high premiums that investors previously assigned to companies related to AI.
A previous semiconductor valuation analysis showed that the market is increasingly concerned about whether future earnings will be able to support the high stock prices.
NVIDIA and AI stocks face new data center risks
The latest round of selling occurred after the Democratic Party achieved electoral victories in several states, where opposition to large-scale data center projects has intensified.
Residents and local officials have raised concerns about power consumption, water usage, and the costs associated with supporting the rapid expansion of computing facilities.
Reuters reported that UBS strategists believe that about 30% of the additional data center capacity expected to be added in the United States by 2028 may face delays.
This estimate reflects potential risks, rather than confirmed project cancellations, but it brings uncertainty to semiconductor manufacturers that expect demand to grow more rapidly in the coming years.
NVIDIA, AMD, and other chip suppliers rely to some extent on cloud companies to continue building large-scale computing clusters. If the construction slows down, it may lead to delays in hardware orders or changes in future revenue forecasts.
After the recent Nasdaq pullback, this pressure has become even more apparent, as the pullback revealed that investors' concerns regarding infrastructure spending and financing are on the rise.
At the same time, the weakness in the AI market earlier on also indicates that even if basic sales remain strong, semiconductor valuations may still shrink.
Why did the upward trend on Wall Street disappear after the election?
The rebound on Wednesday reflects market expectations: political restrictions may benefit existing tech companies, as the existing computing infrastructure will become more valuable.
Amazon, Microsoft, and Alphabet are rising, and investors are beginning to wonder whether future capital expenditures will decrease if construction slows down.
However, the same scenario also poses risks to chip manufacturers and infrastructure providers, as their growth depends on continued expansion.
This divergence became more apparent on Thursday, with investors selling off semiconductor stocks as well as those of companies involved in financing new computing facilities.
Not all tech companies saw declines. AppLovin soared by 31.8% after announcing strong financial results, indicating that investors are still willing to reward those companies that have achieved considerable profits.
