{"slug": "chipflation-is-the-ai-trades-next-major-test", "title": "'Chipflation’ is the AI trade’s next major test", "summary": "New York Life Investment Management global market strategist Julia Hermann warns that 'chipflation'—surging prices for AI-related logic and memory chips—will be the next major test for the AI trade, as rising costs pressure hyperscalers balancing high input costs with a distant return-on-investment outlook. Hermann notes that South Korean memory chip prices are growing at 370% year-over-year, far exceeding past cycle peaks of around 100%, and that this volatility can either spur growth or halt the AI boom.", "body_md": "# 'Chipflation’ is the AI trade’s next major test\n\n[Business Insider](https://www.businessinsider.com)\n\nRising chip costs are a double-edged sword, showcasing strong demand for the hardware, but jacking up costs for companies building AI infrastructure.\n\n- New York Life Investment Management's Julia Hermann is concerned about rising AI chip costs.\n- She sees '\"chipflation\" as the next big test that tech stock investors will face this year.\n- Hermann says that it has the power to either spur growth for the AI trade or pump the brakes.\n\nInflation may have [cooled significantly](https://www.businessinsider.com/cpi-inflation-june-consumer-price-index-2026-7) in June, but one Wall Street strategist says it's still a problem for one of the market's hottest commodities: AI chips.\n\nJulia Hermann, global market strategist at New York Life Investment Management, says that \"chipflation\"—or the surging prices for AI-related logic and memory chips—will be the next headwind to test the strength of the AI trade.\n\n\"Hyperscalers face a balancing act of rising input costs — higher chip prices, as well as rising energy and utility costs — with an outlook for return on investment that is still several years away,\" Hermann told Business Insider. \"We believe this environment is primed to test conviction: investors may tolerate volatility and a slower monetization outlook if they continue to believe in the long term potential of the AI trade.\"\n\nChip stocks have been under pressure lately as investors start to scrutinize the economics of the AI boom. Sector leaders have tumbled in recent weeks, with [investors dumping hot stocks](https://www.businessinsider.com/tsmc-earnings-chip-stocks-selloff-ai-nvda-tsm-stock-market-2026-7) like memory makers and other hardware plays, even as early earnings reports have largely beaten estimates.\n\nIn Hermann's view, Asian markets have been showing the type of growth that can be worrisome, reaffirming her thesis on chipflation.\n\n\"One of the best indicators of chipflation in memory capacity is South Korea's export price index of DRAM memory,\" she said. \"In past cycles, memory chip price growth topped out at around 100% year-over-year growth, but today, South Korean memory chip prices are growing at 370% year-over-year growth.\"\n\nHermann's thesis about the impact of pricier chips centers on the idea that it's a double-edged sword, and a market-driving force that impacts the AI trade in a few ways.\n\nWhile rapidly rising chip prices are an indication of strong demand, they also have the power to grind the AI boom to a halt, as more expensive chips mean higher costs for the companies already [pouring billions](https://www.businessinsider.com/companies-finally-paying-ai-cio-survey-2025-12) into building out AI infrastructure.\n\n\"Although the volatility associated with semiconductor leadership has been primarily to the upside this year, that volatility can work in both directions and test investor conviction,\" she said. \"We are most focused on quality across the AI supply chain, including semiconductor giants, and define quality as strong profitability, low-to-moderate earnings variability, and strong interest coverage.\"\n\n[Business Insider](https://www.businessinsider.com/ai-chip-prices-chipflation-semiconductors-memory-stocks-kospi-ny-life-2026-7)\n\nGet AI news in your inbox\n\nDaily digest of what matters in AI.", "url": "https://wpnews.pro/news/chipflation-is-the-ai-trades-next-major-test", "canonical_source": "https://www.machinebrief.com/news/chipflation-is-the-ai-trades-next-major-test-l8yk", "published_at": "2026-07-20 09:10:01+00:00", "updated_at": "2026-07-20 13:44:35.998895+00:00", "lang": "en", "topics": ["artificial-intelligence", "ai-chips", "ai-infrastructure", "ai-startups", "ai-policy"], "entities": ["New York Life Investment Management", "Julia Hermann", "Business Insider", "South Korea"], "alternates": {"html": "https://wpnews.pro/news/chipflation-is-the-ai-trades-next-major-test", "markdown": "https://wpnews.pro/news/chipflation-is-the-ai-trades-next-major-test.md", "text": "https://wpnews.pro/news/chipflation-is-the-ai-trades-next-major-test.txt", "jsonld": "https://wpnews.pro/news/chipflation-is-the-ai-trades-next-major-test.jsonld"}}