Why OpenAI's deals have markets fearing a crash

Group 1: OpenAI and Chip Deals - OpenAI has announced a deal to purchase 10 gigawatts of computer chips from Broadcom, continuing its trend of significant acquisitions in the AI sector [1] - This follows similar agreements with AMD and Nvidia, raising concerns about OpenAI's extensive connections with major US companies and the potential for an AI-driven market bubble [2][5] Group 2: Impact on European Companies - Analysts suggest that OpenAI's success could positively impact European companies like ASML, as demand and revenues flow through the supply chain from data center companies to chip manufacturers [3][4] - ASML's lithography machines are crucial for producing advanced chips, and there is optimism about ASML's earnings recovering by 2027, indicating strong market demand [15][16] Group 3: Market Valuations and Risks - The IMF's global financial stability report warns that equity and corporate credit valuations are stretched, driven by enthusiasm for AI mega-cap stocks, which could lead to a sudden market correction [5][8] - Current stock valuations are estimated to be about 10% overvalued on average, which is less than the 20% overvaluation seen during the tech bubble of 1999 [8] Group 4: Supply Chain Concerns - There are concerns about the interconnectedness of the supply chain, where issues in major tech firms could have significant knock-on effects throughout the semiconductor industry, impacting companies like Nvidia and TSMC [14][17] - If demand from hyperscalers decreases, it could lead to reduced orders for chips, affecting TSMC's capacity and subsequently ASML's machinery sales [17]