Table of Contents
l Strong demand for AI, resolving the overvaluation of semiconductor-related stocks.
l The semiconductor market is dominated by major companies.
l A new investment strategy for semiconductors has emerged.
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l Demand for AI remains strong, alleviating the overvaluation of semiconductor-related stocks.
Since July, semiconductor-related stocks worldwide have been undergoing adjustments. The trigger for the decline was reported in July when the US warned its allies of considering stricter rules on semiconductor exports to China, as well as the increasing likelihood of President Trump's re-election, who wants to strengthen US-China trade policies. These were the main factors.
Particularly, the performance of Japanese semiconductor-related stocks has been lackluster, significantly underperforming the Nikkei Stock Average. Figure 1 breaks down Japan's semiconductor stock index into estimated EPS (earnings per share) and estimated PE ratio. It is observed that the estimated PE ratio has dropped significantly from July to August, indicating a revision in investor expectations. As a result, the current estimated PE ratio is around the historical average, alleviating concerns of overvaluation.
The semiconductor industry experiences a cyclical Silicon Cycle where prosperity and downturns alternate...