Neocloud and memory chip stocks face sharp sell-off
Valuations for AI infrastructure providers and memory manufacturers have contracted significantly amid fears of Chinese competition. Analysts view the decline as a healthy correction rather than a structural break.
The artificial intelligence sector is undergoing a pronounced correction, with neocloud providers such as CoreWeave seeing share prices fall by 50%. Credit default swaps for these firms have risen above 15%, indicating heightened concerns regarding bankruptcy risk. Gartner predicts that 80% of neocloud companies will lose their independence by 2030. Memory chip manufacturers, including SK Hynix, Samsung Electronics, Micron Technology, and SanDisk, have also experienced sharp declines, with SK Hynix shares dropping by half. This sell-off is partly driven by fears of new competition from China, specifically CXMT, which recently reported a breakthrough in a new 4F2 DRAM architecture. Despite the broad weakness, ASML remains a key beneficiary, having secured orders through 2030. Thomas Rappold argues that the current sell-off represents a healthy correction. He contends that neoclouds are over-leveraged with non-unique business models, while memory chip stocks are now reasonably priced despite their historically volatile margins. Rappold advises investors to avoid the sector, stating that while demand for compute remains high, the current price drop may not signal a permanent collapse.