Some tech shares are plunging - what does that mean for the AI revolution?

A $60B Vote of Confidence

The AI revolution has promised to reshape the way we work and live, and has created vast wealth for investors in a handful of companies predominantly in the US and Asia. Companies are desperate to be the winners of a transformative technology that many have compared to the advent of the internet, the telephone, even electricity itself. As Sir Demis Hassabis, founder of UK company Deepmind, which was eventually bought a decade ago by US giant Google, has commented that Artificial Intelligence "cannot be compared to standard technological breakthroughs, not even ones as consequential as the internet or mobile. It is much more akin to the discovery of electricity or fire." Referring to the fact that many chips are made of silicon, which is essentially sand, he added "we've essentially found a way to make sand think. It's miraculous."

Why Cursor?

Over the last few weeks, the value of some of the companies that make those building blocks has plummetted - prompting some to question whether what some have dubbed "the AI bubble" is about to burst. Some of the sharpest falls have been in Asia, with shares in Korean chip makers such as SK Hynix and Samsung down 46% and 35% respectively over the last month as investors worry the recent boom in demand for the chips that power AI is unsustainable. Yet these shares still are up threefold and fivefold respectively over the last year, leading many to conclude that some caution and profit taking after such massive gains was inevitable – and indeed healthy.

The Road Ahead

Despite the concerns, leading tech investor Eileen Burbidge is still positive. "I see the glass half full - if you bought shares in chip makers a year ago you are feeling pretty good right now." But there is no doubt that investors are watching companies plans for spending and their projections for when they get paid back with post euphoric scrutiny. The AI bubble hasn't burst but it's letting out air, she told the BBC. China breakthrough One of the other triggers for the concerns has been a reported breakthrough in the manufacturing process by a Chinese company, potentially making China more self-sufficient in chip design and production. That has added to lingering concerns that the big AI companies – Meta, Alphabet, Open AI, Anthropic – will find it hard to charge end users enough to justify the hundreds of billions being spent on buying the chips and building the data centres that power the technology.