$NVIDIA (NVDA.US)$ Recently, Morgan Stanley released a resea...
$NVIDIA (NVDA.US)$ Recently, Morgan Stanley released a research report titled "Preparing for a Peak": a reminder that the peak of the technical industry cycle is about to arrive. This is a very important research report, a must-read for semiconductor investment, and can also be used as a semiconductor investment framework. It is strongly recommended to read it carefully.
Semiconductors are in the late stage of the cycle
(1) Morgan Stanley divides the semiconductor cycle into: early stage of rebound -> rising stage -> euphoria stage -> surrender stage. It has now shifted from the "optimism" stage to the "euphoria" stage, as shown in the yellow box in the figure below. In this stage, the risk-return ratio becomes unattractive.
-The growth rate of the semiconductor industry is usually either very high or very low, and it rarely shows moderate growth.
-The industry reaches a balance between supply and demand every two years, but this balance period will not last long.
-The current stage is when the market has different views on future prospects. On the one hand, it is worried that the cycle has reached its peak, and on the other hand, it is worried about missing the AI opportunity.
Comparison of SOX and S&P 500 returns at different stages of the cycle
Based on data from the past 10 cycles
(1) The SOX index outperformed the S&P 500 index by an average of 13 percentage points in the first three months of the "pessimism stage";
(2) During the "skepticism stage", it outperformed by 32 percentage points;
(3) In the "optimism stage", it outperformed by 76 percentage points.
(4) Once entering the “Euphoria” phase, the SOX index lags the S&P 500 by an average of 13 percentage points
Semiconductor cycle
(1) Based on year-on-year sales/price growth forecasts for global revenue, the “true” peak is approaching: current consensus forecasts show that global semiconductor revenue will peak in the third quarter of 2024 (3Q24)
(1) Based on year-on-year sales/price growth forecasts for global revenue, the “true” peak is approaching: current consensus forecasts show that global semiconductor revenue will peak in the third quarter of 2024 (3Q24)
(2) Earnings will continue in 2025, but the market may have already priced in these expectations, resulting in future returns that may be lower than expected
(3) The AI sector is currently performing strongly, but there are still concerns about sustainability. Companies need to continue to exceed expectations to maintain current growth. At the same time, AI as a long-term investment still needs to consider the cyclical nature of the semiconductor industry, so there may be downside risks in the future
Momentum may change suddenly
(1) The peak of the current cycle occurred on January 3, 2022, and it fell to the bottom on October 14, 2022, with a drop of -46% over a period of 284 days. The average decline from peak to trough in history is 41%, with an average of 316 days
(2) From the trough on October 14, 2022 to August 19, 2024, it has lasted 675 days, and the current increase is 144%. On average, the recovery from the trough is 164%, with an average of 574 days.
(3) However, this momentum faces the following risks that may change suddenly.
--Narrative risk: Investors may be attracted to the narrative of "recovery extension", but as the year-on-year growth rate peaks, this narrative becomes increasingly difficult to support.
--Cyclical risk: Investors are faced with late-cycle timing, industry conditions and valuations, seven quarters after the cycle low.
--AI capital expenditure risk: AI computing demand and supply chain capital expenditures are growing so fast that hyperscalers must continue to increase capital expenditures "beyond expectations" to support continued upward earnings expectations in 2025-26.
--Uncertainty in demand for traditional technologies: The latest data on PC sales shows a downward trend, while sales of smartphones and consumer electronics are also weaker than expected.
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Chad Dunbar : I remember people saying similar things about semis around the time of the Great Recession. If you had held Micron with diamond hands, you would have had about a 40-bagger.
10baggerbamm : do you know how shitty they are when it comes to research do you know where they rank and in rank as in stink anybody can publish anything when the market sells off and you look like a fucking hero they write research every fucking day of the week and the reality is 90% of their analyst lag the S&P 500 so take that roll that up with this fucking report shove it up your ass for the sun don't shine because they're wrong 90% of the fucking time.
10baggerbamm : do you want to see the reports that I've got from them because I have hundreds peak oil oils going to $200 a barrel by 2024 where's oil they pounded the table peak oil. I'll say to you what I say to everybody else show your fucking trade where is your put because I told people to buy puts two weeks before they came out with earnings now the Cockroach patrol comes out of the woodwork and pounds their chest you're all late to the fucking game. you were probably buying the Russell after it was up 10% this past month because you believe it was going up 40% this year according to Tom Lee.