Tower CEO Russell Ellwanger tried in recent days to reassure investors after the sharp fall in chip stocks. 'People are getting spooked,' he told Calcalist, adding that he sees no reason for the decline. He said the drop in the stock is unrelated to the company's performance and its forecasts are unchanged: Tower still expects record annual revenue, with silicon photonics as its main growth engine.
Ellwanger's confidence rests on fresh numbers. Last week Tower reported third-quarter revenue of $526 million, up 33%, and expects about $600 million in the fourth quarter. According to the company, its annualized silicon photonics revenue run rate, chips that move data with light between AI chips in data centers, is expected to pass $1.1 billion in the fourth quarter. It also said it will add about 150 employees in Israel.
So why did the stock fall? Because the stock market reacts not only to a company's results but to the mood around the whole AI industry. On Thursday chip stocks plunged on Wall Street amid fears that after the Democrats' midterm win it will be harder to build data centers in the US. Investors selling 'AI chips' as a category do not always distinguish between a company selling finished chips and one like Tower, which makes components for the links inside data centers.
Is Ellwanger right? In the short term Tower's orders look strong, and customers have already committed to much of its output. In the long term, photonics demand depends on how fast the giants keep building data centers. If construction slows, Tower will feel it too, if later. The next event to test his claim is Nvidia's results on November 17, which will show the giants' demand for AI chips.
