By Nermeen Nabil Khear 
Advantest CEO Doug Lefever told the Financial Times that semiconductor firms stand to suffer immensely if AI spending reduces. Although these firms have already made huge investments in data centers to enhance their AI systems, competition in the industry continues to intensify.
AI continues to be high on the list of big tech companies, and discussions have gone toward pacing spending on AI, especially data centers. Doug believes decisions could adversely impact semiconductor companies.
A cooldown on data centers will weigh heavily on semiconductor companies
He explained that the downswing will not have to last long for it to start having an adverse impact on the industry. In 2024, tech firms intensified efforts to improve AI infrastructure such as data centers.
“Any slowdown in the data center buildout is going to have big reverberations in the supply chain.”
Lefever.
Tech firms like Amazon, Microsoft, and Meta have invested huge amounts – billions of dollars – into AI infrastructure, generating both excitement and apprehension on Wall Street.
It is estimated that hyperscalers would have spent as much as about $222 billion on AI chips and data centers by the end of this year. The investments are meant to run the emerging technology and enable the firms to remain ahead of the race for AI supremacy.
While AI spending is expected to continue rising, there are also concerns from industry watchers who are anxious about whether this spending can last, particularly if the technology fails to live up to the hype.
Salesforce CEO Marc Benioff has warned the industry about overspending on AI, which he described earlier this month as a “race to the bottom.”
“While there is a big movement of a lot of companies into these kind of public clouds, I think that we have to be careful exactly how much we’re investing,” explained Benioff.
In September this year, the overspending fears had a knock-on effect on the performance of key semiconductor firms.
Lefever has good reasons for paying attention to industry trends. According to Business Insider, enthusiasm for AI has made semiconductors increasingly complex, which has also boosted demand for Advantest’s products. The report further indicates that ADRs on the Tokyo-based stock are up 71.32% this year as a result.
“I don’t like to use the word bubble because it implies that it’s going to go away, but there will be cycles,” Lefever told the Financial Times.
“When that next cycle comes . . . it could be pretty vicious,” added Lefever.
Smartphones could save the day
However, Lefever feels it’s not all doom and gloom for semiconductor companies in the event that tech firms downsize their spending on data centers. AI-enabled smartphones could save the day for the industry, according to Lefever.
“Everyone is holding their breath, waiting for the killer app with the AI handsets . . . if that happens and people start replacing their phones, it’s going to be crazy,” Lefever said.
According to Business Insider, some Wall Street analysts are also equally upbeat about AI smartphones, a consideration that is reportedly already trickling into the price targets. For instance, Wedbush Securities on Thursday raised its target price on Apple to $325. Wedbush cited the high expectations around Apple Intelligence, Apple’s AI software that is accessible on new iPhone products.
“This will be a multi-year AI journey that will define the future for Apple with its next generation chip architecture, hardware releases, and future iPhone models built around the AI foundation that many consumers will ultimately embrace,” analyst Dan Ives said.
According to the 2025 Mobile Outlook report, the mobile device market is expected to continue transforming in 2025, with generative AI promising to reignite consumer demand.
The report further states that Google and Apple’s introduction of AI-driven hardware and services is expected to impact the silicon ecosystem and the overall market.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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