Jefferies has issued a stark warning that the biggest risk to the AI-driven tech rally is not a sudden increase in semiconductor supply but a sudden realization by investors that hyperscalers and companies like OpenAI and Anthropic will not be able to generate a return on their massive investments. The brokerage's latest research report argues that there is currently zero sign of AI capital expenditure slowing, but funding concerns could trigger an abrupt unwillingness to fund these investments, aggravated by circular arrangements among key players, such as Nvidia financing OpenAI to buy its chips.
China's GLM-5.2 Challenges US AI Dominance
Jefferies' caution comes as Hong Kong-listed Z.ai, formerly Zhipu AI, launched GLM-5.2 on June 13. The report notes that this new model is almost equal to Anthropic as a competitor for the corporate market and costs just one quarter of the price per token. This launch coincides with what Jefferies calls a reaction against tokenmaxxing, which is likely to slow Anthropic's remarkable revenue growth ahead of its planned IPO. Anthropic's annualized run-rate revenue surged from US$9 billion at the end of 2025 to US$47 billion in May, according to Jefferies.
Shift in Usage Toward Chinese Models
The report highlights a significant shift in usage toward Chinese AI models. Top Chinese AI models processed 21.37 trillion tokens on the global aggregator platform OpenRouter in the week ended June 21, up from 4.37 trillion in late April, compared with 5.76 trillion tokens for the top US models. Jefferies cited weekly usage of the top nine models on OpenRouter. The brokerage quoted AI feedback stating that GLM-5.2 proves enterprises no longer have to sacrifice intelligence for privacy, leading to a massive acceleration in companies pulling AI workloads out of the public cloud and back onto local corporate servers.
Memory Suppliers Benefit from Jevons Paradox
Despite token price pressure, Jefferies remains constructive on memory suppliers due to the Jevons Paradox, which suggests that falling token prices should lead to rising DRAM prices. The report states that the argument that the DRAM industry has changed structurally looks increasingly powerful. 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, including Hynix and Kioxia with an initial 4% weighting each in the global long-only portfolio, and increasing the existing investment in Samsung Electronics by one percentage point.
Taiwan's Boom and TSMC Capex
On Taiwan, Jefferies noted boom-like conditions with real GDP up 14.55% year-on-year in the first quarter of 2026, the fastest quarterly growth rate in nearly 48 years. TSMC's capital expenditure is forecast to rise to US$56 billion in 2026 and US$65-70 billion in 2027, with AI expected to account for 31% of TSMC's revenues this year.
Cybersecurity Risks
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 organizations having only months to prepare.
