Chip Chat - Global Semis Newsletter

Research evidence excerpt

Chip Chat - Global Semis Newsletter

hereby stocks that have been under pressure respond positively to better-than-feared numbers

and commentary. The bigger question is whether there is meaningful follow-through after earnings. Following an exceptional run

across the group, many feel valuations have been pulled forward significantly, with investors increasingly underwriting earnings

and demand 12-24 months out. As a result, while companies may continue to execute well fundamentally, there is less conviction

that strong results alone will be enough to drive another leg higher over the summer. Seasonality is also becoming an increasingly

important consideration. Once we get earnings out the way, conference activity slowing and news flow typically lighter through

August, many investors are questioning whether they want to carry elevated gross exposure through a period where catalysts

become scarcer. Several investors seem to believe the strategy may be to participate through earnings, take profits (hopefully) into

any post-results strength and look to rebuild exposure into September as conference season begins.The principal source of

investor nervousness is not around near-term semi fundamentals but around the AI demand narrative underpinning the sector. In

particular, there is growing debate around “token maximisation” versus “token minimisation” and whether improvements in

model efficiency could temper future compute demand or AI infrastructure investment. For now, few believe this represents a

threat to the broader AI infrastructure cycle but any evidence of weaker-than-expected ARR growth or a sharper-than-anticipated

slowdown from the LLM’s would likely have an outsized impact on semis given how much future growth is already embedded in

valuations.