Chip Earnings Season Highlights AI Capex Peak Fears; AMD, AVGO, NVDA Pressure

Semiconductor earnings this week painted a nuanced picture that spooked traders despite record revenues: while AI demand remains robust, early signs suggest the explosive capex cycle that has driven the sector may be moderating. AMD posted strong first-quarter results, but management commentary hinted at a potential normalization in order flow from hyperscalers in the second half. Broadcom similarly beat estimates but warned of potential supply-chain normalization. The collective message: the hypergrowth phase may be peaking, even if absolute demand remains elevated.

This narrative gained traction as broader market conditions deteriorated. AMD fell 3.3%, NVDA declined 2.2%, and AVGO faced pressure as traders repriced the durability of AI spending. The concern isn't that capex will disappear; rather, it's that the incremental surge that has fueled 20-40% revenue growth may slow to mid-teen expansion rates. For semiconductors valued at extreme multiples (some trading at 30-50x forward earnings), even a deceleration in growth could justify multiple compression. The timing is particularly acute because NVDA reports earnings on May 21; any sign that capex growth is moderating could trigger a sharp selloff despite the company's dominant position.

There is also a China angle. With US approval of H200 exports to Chinese companies, some analysts worry that hyperscaler capex may shift from US-based companies (Amazon, Microsoft, Meta, Google) to Chinese cloud providers (Alibaba, Baidu, Tencent). This could pressure US-centric chip suppliers while benefiting exporters. Additionally, the geopolitical tension (Iran, China) has raised uncertainty about future export policies, making it harder for management to commit to aggressive forward guidanceCompany-issued forecasts of future financial performance..

The bull case remains intact: AI workloads are genuine and secular. NVDA has grown to a $5.7T market cap, and the company's technological moatA sustainable competitive advantage that protects long-term returns on capital. appears durable. However, market technicals suggest that excessive positioning in chip names has left the sector vulnerable to profit-taking if any guidanceCompany-issued forecasts of future financial performance. disappointment emerges.