Grow Investment Group is buying into the sell-off in artificial intelligence shares because it expects demand to persist, William Mah, the investment firm's chief investment officer, said in an interview.
Mah sees competition among Chinese AI companies as a bigger concern than weakening demand. Growing sales would not necessarily protect profits if companies cut prices to compete for business.
“AI demand is irreversible,” Mah said in remarks carried by CNA's East Asia Tonight, published Nov. 6. He expects price wars to begin among developers of large language models, the technology behind chatbots, before spreading to chipmakers as production capacity expands.
His concern centres on which companies can turn growing demand into earnings. Even if customers continue spending on AI, competition could reduce the profits available to the Chinese businesses supplying it.
Mah did not identify the shares his fund was buying or give the size of those purchases. He also gave no timetable for the price competition he expects among model developers and chip manufacturers.
The purchases came during a regional retreat in technology shares following a Wall Street sell-off linked to concerns about heavier US regulation of AI, CNA reported. Semiconductor companies and other businesses tied to AI spending suffered heavy losses.
Japan's Nikkei 225 and South Korea's benchmark each fell about 6%, while Taiwan's benchmark lost about 4%, according to CNA. The declines extended losses in markets where chipmakers and other technology companies carry substantial weight.
The broadcaster put the Shenzhen market's decline at more than 2.5%, while benchmarks in Shanghai and Hong Kong each lost more than 1%. Chinese AI suppliers with exposure to US customers were among the companies hit hardest.
The selling followed a rise in AI share valuations in preceding months. Mah's decision to buy during the decline rested on his expectation that demand would continue, even as he anticipated tougher competition over prices.
The distinction matters for companies serving data centres, which house the computing equipment used to develop and run AI systems. Continued demand for that equipment can support sales while expanding supply gives customers more competing sellers.
Mah's expectation of persistent demand therefore left open how much profit Chinese suppliers would retain. His comments offered no company earnings estimates or indication of which businesses he expects to withstand the price wars.
His investment decision and his concern about competition pointed to separate questions: whether AI spending keeps growing, and whether the companies receiving that spending can make money from it.
