Semiconductor names are down a lot, but not oversold, says tech investor Dan Niles

• Chinese AI models are rapidly advancing and closing the gap with US frontier models, demonstrating innovation despite US chip export restrictions.
• Major AI users like Coinbase are actively seeking to cut AI costs by leveraging open-source models, indicating a potential shift towards commoditization of AI models.
• Dan Niles advises focusing on AI infrastructure investments, as he anticipates frontier AI models will eventually become commoditized, making the underlying hardware and services more attractive.
• Semiconductor stocks are down significantly (e.g., SMH down over 15% in a month, Micron down 23.68%), but Niles notes they are not yet oversold, suggesting caution for re-entry into infrastructure names.

Dan Niles discusses the US-China AI rivalry, noting that Chinese models are becoming highly competitive despite hardware restrictions, driving innovation in software. He suggests that this competition, coupled with major AI users cutting costs, could lead to the commoditization of frontier AI models. Niles believes the long-term investment opportunity lies more in AI infrastructure than in the models themselves.