Yahoo Finance Senior Markets Reporter Ines Ferre and DA Davidson Head of Technology Research Gil Luria break down the tech stock (XLK) pullback following calls to slow AI development, while highlighting the renewed strength in the cybersecurity sector.
what we mean by tech stocks though is really the semiconductor space because if you take a look at the semi space, really the picks and shovels of the AI trade, the one that’s been the forerunner in this whole infrastructure buildout. They’re getting slammed right now. You’re looking at Nvidia that’s down 4%. You’ve got AMD, Broadcom, all of those lower, Micron, the high flyer lower as well, Sandisk. So, when you’re looking at the AI space, it’s really that infrastructure play that is getting hammered off of these fears as you were just talking about.
Yeah, cyber security. Glad you mentioned that. Crowdstrike, Palo Alto Networks, uh Okta even getting a boost here pre-market. Um or in during the market uh early going. Gil, let me get back to you. Microsoft, Amazon, Google, uh of course are investing billions of dollars in AI. How are they, how are these stocks looking if things do slow down on the AI front?
Oh, they’ll be just fine because just the current level of technology and the technology is still going to get better is enough to deliver a lot of capabilities for their customers for which they will get paid for. Uh how much that demand grows will determine how many more data centers they’ll bring online, but if we were to actually stop development of AI, which we are not, then nobody’s actually slowing anything down. If we were to actually slow down the development of the technology, they would slow down the rate of building those data centers. They could do that really on a dime. They could just sit on land long term and not put uh GPUs and data centers on top of that. Uh so they will be fine and even if they, let’s say they did overbuild over the next year or two, they can just sit on that, um absorb the extra capacity and their cash flow will actually skyrocket. So that’s why they’re fine either way. If we accelerate AI, they’ll build more data centers, if we slow down AI, they’ll just use the existing data centers, they’ll be able to absorb that capacity.
