Is AI Capital Expenditure Causing Trouble? High Valuation of Semiconductors 'Perfect Demand' Fades, Goldman Warns of Market Overleveraging

This year's stock market, driven by chip-related stocks, has seen a sharp decline this week, raising questions among investors about whether the AI frenzy has led to excessive leverage and overvaluation. The Wall Street Journal reported that U.S. stocks continued to fall, with the selling of chip stocks further intensifying the selling pressure, dragging down the Nasdaq index, which is mainly composed of technology stocks, by 1.4%, and the S&P 500 index also fell by 1%. China's startup company 'Moonshot AI' released its latest AI model Kimi K3, claiming that its performance has caught up with some of the most advanced AI models in the United States, further deepening investors' concerns about whether the huge capital expenditure on artificial intelligence is worthwhile, also leading to a decline in the stock prices of Intel (Intel), Applied Materials (Applied Materials), and AMD (AMD). On April 14, 2025, a person walks past the Nasdaq market in New York (AP). Reuters reported that investors from Asia to Europe are reducing their holdings in stocks affected by AI, as well as the so-called momentum stocks that have pushed up investment portfolio returns for most of the year. The Philadelphia Semiconductor Index fell 1.6% today, with a cumulative decline of about 10% this week, marking the largest single-week decline in over a year. The Philadelphia Semiconductor Index confirmed that it has entered a bear market at today's close, down more than 20% from the historical high set at the end of June. Toni Meadows, the investment manager of BRI Wealth Management (BRI Wealth Management), said, 'This correction reflects profit-taking and external scrutiny of the sustainability of AI capital expenditure. Semiconductor stocks' valuations had already reflected nearly perfect demand, and this industry has had cyclical characteristics, so after such a rapid rise, related stocks are likely to face correction at some point.' The Philadelphia Semiconductor Index has risen by more than 60% so far this year. Chuck Carlson, the CEO of Horizon Investment Services (Horizon Investment Services) in Indiana, said, 'I think this has less to do with fundamentals and is mainly just portfolio rebalancing and some profit-taking on stocks that have risen too much.' Analysts pointed out that there are multiple reasons for the market's sharp reversal this month. On the one hand, after China's DeepSeek, it once again released a free, open-source AI model that can compete with the high-cost and highly dependent massive computing system AI models developed by Silicon Valley giants, once again raising the question of whether the entire industry's large-scale investment in data centers is really reasonable. In addition, Bloomberg (Bloomberg News) pointed out that Alphabet's Google has fallen behind the scheduled progress by several months in the release of its most powerful flagship AI model Gemini 3.5 Pro. On the other hand, the weakness of the technology industry has also raised concerns that investors may have over-expanded or are in a highly leveraged state. Investors have faced violent volatility since early July: the Korean Composite Stock Price Index (KOSPI) showed that it had fallen into a bear market last week, despite a year-to-date gain of nearly 62%; the Nikkei 225 index fell into the correction range on the 17th; and European technology stocks, after achieving the largest single-quarter gain since 2001 in June, also became one of the worst-performing sectors this week. Tony Pasquariello, the head of hedge funds at Goldman Sachs (Goldman Sachs), pointed out in a report to clients that leverage accumulation can be seen in various parts of the market, as evidenced by the increase in retail financing amounts, the growth of leveraged ETF asset management scale, and the surge in short-term option trading volume. A senior executive at a bank serving hedge funds said that large hedge funds, which usually rely on leverage to amplify market operations to improve returns, have reduced their exposure to top AI infrastructure-related individual stocks in recent weeks. Walter Todd, the investment manager of Greenwood Capital (Greenwood Capital) in South Carolina, said, 'Everyone has over-expanded their positions in these stocks. In the past few months, many people thought these stocks would only go up. If they had initially borrowed money to buy, they might now face the predicament of being forced to cover the margin.'