I’ve seen some KOLs say that the turning point for semiconductor stocks will come in 2030.
The reasoning is that new capacity will gradually come online around 2030, easing the supply crunch, and then stock prices should fall.
If you think about it carefully, there’s an implicit assumption here: that the industry’s turning point and the stock market’s turning point will coincide. When the industry peaks, stock prices peak too.
That sounds reasonable, but in reality, umm, not necessarily.
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Insufficient capacity seems more like a basic condition supporting stock prices right now—it can only ensure that prices don’t plunge.
Yesterday, Samsung reported operating profit up nearly eightfold year over year, exceeding 100 trillion won. In any normal year, those results would be extraordinary.
And what happened? The stock price fell. Of course, trading factors such as overly high expectations and profit-taking played a role.
But the market is starting to focus on questions further upstream than current semiconductor profits.
For example, whether AI can actually generate profits.
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Yesterday, the Financial Times reported that OpenAI’s annualized revenue in September was close to $50 billion, below the roughly $70 billion figure previously circulating in the market.
There are differences in how the figures are calculated, so you can’t simply interpret this as OpenAI’s business suddenly shrinking by $20 billion.
But the market doesn’t care about the different accounting methods—it just sends the stock tumbling.
Sure, capacity is tight, but the market no longer cares. All it wants to know is whether you can ultimately turn those costs into revenue.
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On top of that, consider the current macroeconomic environment:
Rising yields on long-term government bonds mean a higher discount rate for future cash flows.
Debt and fiscal problems in Europe are increasing the global risk premium.
The U.S. midterm elections are adding uncertainty around fiscal policy, regulation, and industrial policy.
While none of these factors affect how many chips are sold, they can all weigh on market valuations.
That’s why semiconductor stocks are diverging so sharply right now. They’re difficult to trade, and the market is likely to go through a fairly prolonged correction.
The reasoning is that new capacity will gradually come online around 2030, easing the supply crunch, and then stock prices should fall.
If you think about it carefully, there’s an implicit assumption here: that the industry’s turning point and the stock market’s turning point will coincide. When the industry peaks, stock prices peak too.
That sounds reasonable, but in reality, umm, not necessarily.
——————
Insufficient capacity seems more like a basic condition supporting stock prices right now—it can only ensure that prices don’t plunge.
Yesterday, Samsung reported operating profit up nearly eightfold year over year, exceeding 100 trillion won. In any normal year, those results would be extraordinary.
And what happened? The stock price fell. Of course, trading factors such as overly high expectations and profit-taking played a role.
But the market is starting to focus on questions further upstream than current semiconductor profits.
For example, whether AI can actually generate profits.
——————
Yesterday, the Financial Times reported that OpenAI’s annualized revenue in September was close to $50 billion, below the roughly $70 billion figure previously circulating in the market.
There are differences in how the figures are calculated, so you can’t simply interpret this as OpenAI’s business suddenly shrinking by $20 billion.
But the market doesn’t care about the different accounting methods—it just sends the stock tumbling.
Sure, capacity is tight, but the market no longer cares. All it wants to know is whether you can ultimately turn those costs into revenue.
——————
On top of that, consider the current macroeconomic environment:
Rising yields on long-term government bonds mean a higher discount rate for future cash flows.
Debt and fiscal problems in Europe are increasing the global risk premium.
The U.S. midterm elections are adding uncertainty around fiscal policy, regulation, and industrial policy.
While none of these factors affect how many chips are sold, they can all weigh on market valuations.
That’s why semiconductor stocks are diverging so sharply right now. They’re difficult to trade, and the market is likely to go through a fairly prolonged correction.