Citadel CEO Ken Griffin warns that an oversupply of AI chips could trigger a sharp decline in pricing. He compares graphics processing units to airline seats, noting that both have low marginal operating costs. Griffin suggests that if supply exceeds demand, prices may collapse, similar to the telecom market crash around 2000.
Griffin also questioned the long-term utility of current GPUs, noting that while five-to-six-year-old chips remain profitable, this trend may not persist. Furthermore, corporate buyers are increasingly evaluating whether tasks require premium models from OpenAI and Anthropic or can be handled by cheaper open-source alternatives.
Market sentiment remains cautious as the Philadelphia Semiconductor Index recently dropped 11.4% in a single week, marking its largest decline since April 2025. Analysts at BTIG now anticipate a potential chip market slump extending into 2027, challenging the investment assumptions currently driving the AI infrastructure build-out.
