The current AI chip boom, largely driven by companies like Nvidia and AMD, could face a significant downturn by 2025, according to Morningstar’s analysis. The report suggests that while the AI semiconductor market is experiencing unprecedented growth, with Nvidia’s data center revenue growing 279% year-over-year, this surge might not be sustainable. Morningstar predicts a potential oversupply situation by 2025 as chip production catches up with demand. The analysis points to historical patterns in semiconductor markets where periods of shortage are typically followed by oversupply. Key factors contributing to this potential bust include aggressive capacity expansion by manufacturers, the cyclical nature of semiconductor demand, and the possibility that current AI infrastructure buildout might slow down once initial requirements are met. The report also highlights that major cloud providers like Amazon, Google, and Microsoft are developing their own chips, which could impact traditional chip makers’ market share. However, the analysis maintains a positive long-term outlook for AI chip demand, suggesting that any downturn would be temporary. The report emphasizes that companies should prepare for potential market corrections while maintaining strategic investments in AI capabilities. This forecast serves as a warning for investors and companies heavily invested in the AI chip sector to consider potential market adjustments in their medium-term planning.
Source: https://www.businessinsider.com/ai-gold-rush-chip-boom-bust-morningstar-2025-9