New Delhi, July 3 -- While the AI boom is supported by strong cash flows, it is not immune to shocks, with chip shortages posing a major risk to the rally, says Nuvama Institutional Equities.

As per the brokerage house, supply shock or a sharp rise in US Federal Reserve interest rates could trigger a turning point in the AI boom, as rising chip costs and stretched valuations expose early signs of excess in the rally.

It noted, higher hardware prices are inflating hyperscalers' capex and squeezing cash flows at a time when monetisation of AI remains limited, potentially forcing a reassessment of investment plans as investor pressure builds.

Additionally, the surge in AI capex and global hardware stocks already shows clear signs of exces...