AI chipmakers face a valuation reset even as supply stays sold out
Chipmakers have sold-out supply and multi-year order books, yet the market is pricing them as if the AI cycle is about to break.
The US equity markets are pricing in financing strain and a possible demand cliff in the AI bubble narrative. However, the latest broker research continues to model multi-year earnings growth and, in several cases, describes forward valuations as being at trough or near-trough levels. Chipmakers are at the centre of the debate because they supply the physical capacity that hyperscaler spending ultimately requires.
Three names dominate the research discussion: NVIDIA, SK Hynix, and the foundry-and-custom-silicon pairing of TSMC and Broadcom. The core tension for chipmakers is the gap between order-book visibility and the multiples the market is willing to pay. AI stocks slid again on Tuesday, November 3, as investors questioned whether the sector's infrastructure build-out can generate returns quickly enough to justify its financing needs.
Korean chipmakers led the decline, with Samsung Electronics and SK Hynix falling as much as about 5% in early Seoul trading. NVIDIA: The financing test case NVIDIA is the market's biggest financing test case. The concern is less about NVIDIA's own revenue than about its customers' ability to continue funding the build-out. Barclays estimates roughly $250 billion in off-balance-sheet customer commitments.
Its calculation suggests that projected cash and free cash flow will cover those commitments 1.65 times by April 2027, or about 1.25 times after buybacks and dividends. That is the bull case in numerical form: NVIDIA's cash generation, on this view, can underwrite much of the ecosystem even if financing conditions tighten. Consensus FY2027 EPS is near $9.30, rising to about $15.80 in FY2028. Bloomberg's average target is $325, implying almost 60% upside, with 96% of analysts rating the stock Buy.
The next hard test arrives on November 17, when NVIDIA reports its fiscal third-quarter results. Analysts polled by FactSet expect EPS of about $2.47 on revenue of roughly $109 billion. The earnings call will be scrutinised for evidence on data-centre demand, customer concentration and any signs of a slowdown in hyperscaler orders. SK Hynix: Crisis-era multiple, sold-out supply SK Hynix has seen the most extreme valuation reset in the group.
Korean and global brokers now value the shares at roughly three times projected 2027 earnings, levels several houses describe as crisis-era pricing. Yet the company's own disclosures and broker commentary point in the opposite direction. J.P. Morgan maintains an Overweight rating and a W2.75 million target, based on seven times average FY2026-27 EPS. UBS is more constructive, with a W3.0 million target after raising its 2027 and 2028 operating-profit forecasts.
The fundamental argument is visibility. SK Hynix has signed long-term supply agreements with 14 major customers, including leading cloud-service providers. Those agreements already cover more than half of its total production capacity for 2027 and 2028, while management says DRAM and HBM supply is effectively sold out through 2029. Customer requests for HBM exceed available supply by more than two times, and the company expects the memory shortage to persist through 2030.
To meet HBM4 demand, SK Hynix plans to take its M15X facility in Cheongju to maximum capacity by year-end. HBM4 is expected to overtake HBM3E in both shipment volume and revenue in the fourth quarter. The broker logic is straightforward: if HBM demand remains ahead of supply into 2030 and more than half of 2027-28 capacity is already contracted, a three-times-forward multiple suggests the market is pricing in a severe downturn rather than the current order book.
Broadcom: Growth intact, multiple compressed Broadcom remains one of the clearer AI semiconductor growth stories in broker research. Consensus next-year EPS estimates are in the high teens to low 20s. Bloomberg shows 95% Buy ratings and an average target near $529, roughly 60% above current levels. The brokerage case continues to assume that AI semiconductor revenue will roughly double again in FY27 and then again in FY28.
The investment debate is less about whether demand for custom AI silicon is growing and more about whether Broadcom can sustain that growth as hyperscalers allocate more spending to in-house chips. TSMC: The capacity bottleneck TSMC is the capacity backbone of the AI build-out. Deutsche Bank raised its 2027 and 2028 capital expenditure forecasts to $84 billion and $100 billion, respectively, after management said TSMC would “leave no AI food on the table”.
Street estimates for 2027 EPS cluster around NT$145-150, while Bloomberg's average ADR target is $576. Brokers continue to view demand for advanced nodes and advanced packaging as structurally under-supplied. TSMC's 97% Buy rating reflects that view: a multi-year capacity cycle, even as investors worry about the eventual returns on the spending that supports it.
