High-frequency traders such as Jane Street shift to computing power race, spending up to about 20 times more over four years

Related topics top start Related topics top end Futures promotion begin Futures promotion end Miaopai begin Miaopai end Video player start Video player end Market chart begin Market chart end

For years, high-frequency traders such as Jane Street and Hudson River Trading have engaged in a nanosecond-level speed race. But today, the contest among Wall Street's market-making giants has moved beyond a simple race for speed.

It is a huge and potentially risky bet, coming as doubts deepen over the cost and feasibility of building data centers and manufacturing the next generation of semiconductor chips. Several AI-related IPOs have failed this month, and heavy selling pressure has also raised financing costs for companies building AI infrastructure.

But for high-frequency traders, if investing in this area can bring stronger computing power and faster chips, then it is not up for debate. These firms profit mainly from tiny price spreads by trading in and out quickly and matching buyers and sellers. As they increasingly use machine learning to predict market behavior more accurately, their performance is directly tied to computing power — at least in theory. At the same time, market makers also believe that computing power is crucial for attracting top industry talent.

As a result, companies are spending heavily to expand computing power, not only by investing in or trading with tech giants and startups, but even by building their own data centers. By one estimate, their spending on computing power has increased by as much as about 20 times over the past four years. The pitfalls are not to be underestimated: costs are climbing, any lead may be fleeting, and some of the companies they invest in are facing growing pressure, including the need to prove they have a viable path to profitability. But most high-speed traders believe they have little choice if they do not want to be eliminated by the market.

"If you don't want to join this trend, it is hard to continue using the more systematic trading strategies that are now necessary for market making," said Jan Boomaars, chief executive officer of Amsterdam-based high-speed trader Optiver Holding BV.

Recommended reading: Wall Street banks respond to soaring AI costs, shifting from "blank checks" to careful budgeting news_keyword_pub,usstock, iframe below body iframe below body General statement General statement QR code at end start QR code at end start

QR code at end start QR code at end start Editor name and work code

Editor name and work code