Jefferies warns AI malinvestment, not chip supply, will end current tech cycle as China's GLM-5.2 pressures US AI leaders
New Delhi, June 27
The biggest risk to the AI-driven tech rally is not a sudden jump in semiconductor supply but a "sudden realisation by investors that the hyperscalers and the likes of OpenAI and Anthropic will not be able to make a return on their investment," according to latest research report by Jefferies.
The brokerage argued that "for now at least, there remains zero sign of AI capex slowing," yet warns that funding concerns could "trigger a sudden unwillingness to fund these investments which will then be aggravated by the circular arrangements between the main players, such as Nvidia financing OpenAI to buy its chips."
Jefferies' view comes as Hong Kong-listed Z.ai, formerly Zhipu AI, launched GLM-5.2 on 13 June. "GREED & fear is no expert but GREED & fear hears from more informed sources that this new model is almost equal to Anthropic as a competitor for the corporate market and is just one quarter of the cost in terms of cost per token," the report said. The launch coincides with what Jefferies calls a "reaction against tokenmaxxing" that is likely to "lead to a slowdown in Anthropic's uptil now remarkable revenue growth ahead of its planned IPO." Anthropic's annualised run-rate revenue "surged from US$9bn at the end of 2025 to US$47bn in May," Jefferies noted.
The report highlights a shift in usage toward Chinese models. "Top Chinese AI models processed 21.37tn tokens on the global aggregator platform OpenRouter in the week ended 21 June, up from 4.37tn in late April, compared with 5.76tn tokens for the top US models," Jefferies said, citing weekly usage of the top nine models on OpenRouter. "GLM-5.2 proves enterprises no longer have to sacrifice intelligence for privacy. We are seeing a massive acceleration in companies pulling their AI workloads out of the public cloud and back onto local corporate servers," the brokerage quoted AI feedback it received.
Despite token price pressure, Jefferies remains constructive on memory suppliers due to the Jevons Paradox. "Falling token prices should lead to rising DRAM prices," the report stated, adding that "the story that the DRAM industry has changed structurally... looks to GREED & fear an increasingly powerful argument." Hynix, Samsung Electronics and Micron are now trading at 7.8x, 6.8x and 9.2x consensus 12-month forward earnings, respectively.
Reflecting this view, Jefferies is increasing tech hardware exposure across portfolios. "Hynix and Kioxia will be included in the global long-only portfolio with an initial 4% weighting each... while the existing investment in Samsung Electronics will be increased by one percentage point," the report said.
On Taiwan, Jefferies noted "boom-like conditions" with real GDP up 14.55% YoY in 1Q26, "the fastest quarterly growth rate in nearly 48 years." TSMC capex is forecast to rise to US$56bn in 2026 and US$65-70bn in 2027, with AI expected to account for 31% of TSMC's revenues this year.
The report also flagged cybersecurity risks, citing a Five Eyes Alliance warning that "advances in AI could dramatically accelerate cyberattacks in the near future with organisations having only months to prepare."
— ANI
Reader Comments
Interesting to see GLM-5.2 making waves. China's progress in AI is impressive, and if they're offering corporate-grade solutions at one-fourth the cost, that's a real competitive threat. The token price drop is good for consumers though. But Jefferies' warning about circular funding (Nvidia financing OpenAI to buy its chips) is concerning. Risks of a house of cards here. 👍
The part about companies moving AI workloads back to local servers from public cloud is huge for data privacy and sovereignty. India should look at this trend as an opportunity to develop our own enterprise AI solutions, rather than just being consumers of US or Chinese tech. Jio and TCS should take note!
Jefferies is right to flag the "malinvestment" risk. The AI hype cycle reminds me of what happened with crypto - massive speculation, then reality check. However, I respectfully disagree somewhat: the underlying tech (like GLM-5.2) does have real value. The real issue is Wall Street overvaluing companies with no clear business model. Memory stocks like Samsung and Hynix look like safer bets given Jevons Paradox.
Wait, so Anthropic went from $9B to $47B annualized revenue in just months? That's either incredible growth or questionable math. Either way, Jefferies' point about AI capex being circular is valid. Also, the cybersecurity warning from Five Eyes is deeply concerning - AI-powered cyberattacks could be devastating for countries like India that are rapidly digitizing. We need stronger domestic cybersecurity infrastructure! 😟
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.