In the AI era, hardware takes the leading role, requiring a macro perspective from tech investors.
November 24, 2024, 7:52 AM GMT+9
Investors in the technology sector are facing new changes. They have historically paid little attention to macroeconomics. In this field, continuous performance improvements of products and innovative growth strategies have been much more powerful factors for investment returns than the overall economic growth and inflation trends. However, the landscape is starting to shift due to artificial intelligence (AI) and the enormous capital demand associated with it.
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As a semiconductor manufacturer, Nvidia, whose market capitalization exceeds $3.5 trillion, is currently adopting a 'one-year rhythm' for the announcement of new products. This means that they are accelerating the pace of product announcements from the past by twice.
In other words, such companies will impact the traditional 'inventory cycle.' If demand exceeds current supply, inventory will decrease and prices will rise. The reverse is also true. Unlike agile software companies, hardware-related businesses struggle to expand or reduce production capacity quickly. Therefore, it is common for both the quantity and price of hardware to fluctuate according to the overall economic situation.
One notable point is that semiconductor revenue has maintained a positive correlation with manufacturing PMI (Purchasing Managers' Index) for decades. However, in 2022, with the frenzied boom around AI intensifying, this correlation began to weaken. If the previous pattern holds, it would not be surprising if adjustments cast a shadow over the global boom in semiconductor revenue.
This is just one example, but investors in the technology sector, like other investors, may need to be aware of the macroeconomy.
(The author is a portfolio manager at Fidelity International. This column is written based on the author's personal views)
As a semiconductor manufacturer, Nvidia, whose market capitalization exceeds $3.5 trillion, is currently adopting a 'one-year rhythm' for the announcement of new products. This means that they are accelerating the pace of product announcements from the past by twice.
In other words, such companies will impact the traditional 'inventory cycle.' If demand exceeds current supply, inventory will decrease and prices will rise. The reverse is also true. Unlike agile software companies, hardware-related businesses struggle to expand or reduce production capacity quickly. Therefore, it is common for both the quantity and price of hardware to fluctuate according to the overall economic situation.
One notable point is that semiconductor revenue has maintained a positive correlation with manufacturing PMI (Purchasing Managers' Index) for decades. However, in 2022, with the frenzied boom around AI intensifying, this correlation began to weaken. If the previous pattern holds, it would not be surprising if adjustments cast a shadow over the global boom in semiconductor revenue.
This is just one example, but investors in the technology sector, like other investors, may need to be aware of the macroeconomy.
(The author is a portfolio manager at Fidelity International. This column is written based on the author's personal views)
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