Wall Street Remains Bullish on AI Hardware Manufacturers! Worth Holding Stocks Amid Model Competition and Chip Demand

Since July, chip manufacturers' stock prices have been highly volatile, but Wall Street analysts remain bullish on AI hardware manufacturers in the long term, believing it is worth holding these stocks.

According to Business Insider, the once-red-hot AI investment group has recently been hit hard by violent fluctuations. After several months of a big rally, profit-taking selling pressure, competitive pressure from Chinese AI models, and uncertainty about interest rate prospects have all contributed to chip stocks briefly falling into a bear market last week.

However, Wall Street analysts say that despite recent market volatility and concerns, the long-term growth momentum of the AI market remains robust, so investors should continue to hold AI hardware-related individual stocks.

Bank of America said, "The recent release of open-source AI models, including China's Kimi K3 launched on July 16, further strengthens our investment thesis for the memory industry."

Merrill Lynch pointed out, "Overall, we believe that Chinese open-source models offer highly competitive API pricing (up to 5 to 350 times cheaper than Western models), reflecting a choice of business models rather than necessarily reflecting hardware costs."

Last week, Chinese AI startup Moonshot AI released Kimi K3, drawing high market attention. After the news was announced, chip stocks once plummeted sharply, similar to the situation when China's AI model DeepSeek R1 was launched in January 2025, which also caused AI concept stocks to be heavily sold off.

However, Merrill Lynch believes that while open-source models like Kimi K3, launched by rapidly rising Chinese AI labs, may put competitive pressure on tech companies offering similar products, they will also drive more AI computing demand, further boosting chip demand.

Merrill Lynch analysts said, "When leading AI model developers invest heavily to capture the market, the overall market's computing power and memory demand are also expanding in sync."

He pointed out that whenever companies choose to download open-source models such as Qwen, GLM, Hunyuan, or MiMo instead of paying to use Anthropic's Claude Opus, it will drive up memory capacity demand on the corporate side.

On the other hand, UBS believes that even if competition from overseas AI developers may weaken demand for top AI labs in the U.S., there is no reason to expect an oversupply in the high-end GPU market.

UBS Americas investment head Ulrike Hoffmann-Burchardi recently pointed out that her team does not believe the recent bear market decline in chip stocks reflects potential oversupply.

They also believe that even if AI chip costs continue to rise, large-scale data center operators will not cut back on capital expenditures in the AI sector due to short-term inability to profit.

She wrote in a report to investors: "Tech giants view AI as a 'winner-takes-all' existential battle. Even if short-term financial returns are low, companies will continue to purchase hardware to prevent competitors from gaining permanent technological advantages."

Hoffmann-Burchardi also shares the same view as Merrill Lynch, believing that new-generation AI models such as Kimi K3 and Inkling launched by Thinking Machines are creating more growth opportunities for AI hardware manufacturers because intensified competition will further boost chip demand.