However, Firmus pulled the plug on its IPO at the last minute due to a lack of investor demand, which suggests funding might be starting to dry up for the AI industry. Mounting losses at some of the world’s largest AI labs are an increasing concern, and rising interest rates are giving many investors a risk-free alternative for their money. <\/p>\n
Here’s why this development could have negative consequences for semiconductor suppliers like Nvidia and Micron Technology (NASDAQ: MU). <\/p>\n
According to Nvidia, the top-five hyperscale companies (including Microsoft, Amazon, and Alphabet) are on track to spend around $800 billion on AI data center infrastructure in 2026 and could spend a further $1.3 trillion in 2027. As a result, demand currently outstrips supply for critical chips like the graphics processing units (GPUs<\/a>) supplied by Nvidia and the accompanying high-bandwidth memory (HBM) supplied by Micron. <\/p>\n Microsoft, Amazon, and Alphabet build this infrastructure to develop their own AI software, but they also rent computing capacity to other businesses via their respective cloud platforms<\/a>. This practice has become very lucrative, and Microsoft Azure, Amazon Web Services, and Alphabet’s Google Cloud each delivered accelerating revenue growth in the quarter ended June 30. <\/p>\n In theory, hyperscalers will continue building more infrastructure as long as they believe there is demand for computing capacity. But cracks are starting to form; to keep up with the soaring costs of chips and components, companies like OpenAI, Anthropic, and even Microsoft have dramatically raised prices for using their AI models and software over the last few months. <\/p>\n Story Continues <\/p>\n OpenAI, for instance, recently introduced a new $500-per-month subscription plan for uncapped use of its flagship models, representing a whopping 150% increase over its $200-per-month plan, which used to be its most expensive offering. A report by the Financial Times last Thursday suggests OpenAI’s annualized revenue is now tracking at $50 billion, below the $70 billion previously reported by other outlets. That might be a sign customers are pulling back amid the price hikes. <\/p>\n That isn’t surprising, considering companies like Uber Technologies, Walmart, AT&T, and even Amazon have placed AI usage restrictions on their employees this year to prevent budget blowouts. In fact, a recent survey by UBS Group found that 60% of businesses are diverting some AI workloads to cheaper, more efficient models to reduce costs. These models typically consume less computing power than those from labs like OpenAI, which could result in lower demand for chips. <\/p>\n Therefore, Firmus’ withdrawn IPO is just one more sign that sentiment toward AI might be shifting, at least temporarily. <\/p>\n Investors might be pricing in weaker semiconductor demand already <\/p>\n Nvidia stock is trading at a price-to-earnings (P\/E) ratio of just 29.1 as I write this (Oct. 9), which is less than half its 10-year average of 61.3. <\/p>\n NVDA PE Ratio<\/a> data by YCharts.<\/a> <\/p>\n Micron stock is even cheaper. Its P\/E ratio is just 13.9, a sizable discount to both the S&P 500 and Nasdaq-100 indexes, which have P\/E ratios of 23.3 and 34.6, respectively. With an uncertain demand outlook and more supply scheduled to come online over the next couple of years, it appears Wall Street is betting the data center memory boom will be short lived. <\/p>\n So, what should investors do? Those who already own shares of Nvidia and Micron might want to hold on and take a wait-and-see approach. Over the next month, the hyperscalers will release their operating results for the quarter ended Sept. 30. If they announce a pullback in capital expenditures, a slowdown in semiconductor demand is almost certainly on the horizon, which might be a sign for investors to trim their positions. <\/p>\n Investors who don’t already own shares of Nvidia and Micron might want to wait on the sidelines. While they seem cheap at face value, the market is sending a clear message that perhaps these companies won’t grow their earnings as fast as initially expected over the next couple of years. <\/p>\n Should you buy stock in Nvidia right now? <\/p>\n Before you buy stock in Nvidia, consider this: <\/p>\n The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks<\/a> for investors to buy now\u2026 and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. <\/p>\n Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $379,123!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,408,822!* <\/p>\n Now, it’s worth noting Stock Advisor’s total average return is 950% \u2014 a market-crushing outperformance compared to 215% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. <\/p>\n See the 10 stocks \u00bb<\/a> <\/p>\n *Stock Advisor returns as of October 12, 2026. <\/p>\n Anthony Di Pizio<\/a> has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Micron Technology, Microsoft, Nvidia, and Walmart. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy<\/a>. <\/p>\n<\/a> Image source: Getty Images. Yet another crack in the AI boom <\/p>\n
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