BOCOM INTL has released a research report stating that recent volatility in technology stocks has noticeably increased. Beyond investor concerns over discussions about AI infrastructure oversupply triggered by META's management, the primary reasons for the stock price fluctuations are likely excessive valuations following the rapid surge in the second quarter, overly crowded trades, and profit-taking by investors. The bank also believes the fundamentals of AI infrastructure remain unchanged. After a significant year-on-year increase in capital expenditures by major cloud service providers in 2026, spending may continue to rise in 2027. Furthermore, the entities investing in AI infrastructure are likely diversifying, and investment channels may become more varied. The bank contends that key upstream supply chains, including advanced/mature semiconductor manufacturing, optical modules/optical communications, memory, and advanced packaging, are expected to remain in a state of undersupply. The main views of BOCOM INTL are as follows:
Global Tech Stock Volatility Increases but Still Outperforms Broader Market
Over the past month, global technology stocks have experienced significant volatility due to heightened uncertainty surrounding the Federal Reserve's monetary policy path and crowded trading in the tech sector, particularly in memory-related segments. However, technology stocks in the US, A-share, and Hong Kong markets have still outperformed their respective broader indices. From June 10 to July 9, 2026, the MSCI Information Technology Index rose 4.0%, outperforming the MSCI World Index (+3.2%). The A-share Wind Information Technology Index surged 13.9%, significantly outperforming the CSI 300 (+2.7%) and continuing its strong growth trend. Most other primary sectors in the A-share market declined, making the information technology sector a standout performer. The Hang Seng Tech Index edged up 0.1%, while the Hang Seng Index fell 1.5%; Hong Kong tech stocks performed relatively weaker compared to their A-share and US counterparts. On the valuation front, US tech stock valuations have remained relatively stable, with the price-to-earnings ratio (NTM) of the Philadelphia Semiconductor Index briefly surpassing the extremely high levels seen around October 2025 during the month. The price-to-earnings ratio of the A-share Shenwan Electronics Index rose to 101.0x over the past month, and the Shenwan Semiconductor Index P/E ratio climbed to 158.4x; both indices reached their highest levels since 2020 during the month.
Upward Revision to AI Communication Network Chip Market Size Forecast
Based on the financial results of Broadcom and NVIDIA, the bank has revised its market size forecast for AI communication network chips upward to $107.5 billion and $154.9 billion for 2026 and 2027, respectively (previous estimates: $55.4 billion and $67.8 billion). The bank believes that as AI infrastructure network architectures continue to evolve, the importance of network chips within the AI chip landscape is likely to increase further.
May Semiconductor Equipment Imports Fall 9% Year-on-Year, Domestic Substitution Accelerates
In May 2026, the import value of semiconductor equipment into mainland China decreased by 9% year-on-year. The cumulative import value from January to May fell by 11% year-on-year. The bank attributes this primarily to the enhanced competitiveness of domestic equipment and constraints on the production capacity/export capabilities of overseas equipment manufacturers. The bank maintains its forecast for the mainland China semiconductor equipment market size at $57.2 billion and $65.0 billion for 2026 and 2027, respectively, and expresses confidence in the prospects for domestic substitution in this sector.
TSMC reported June revenue of NT$442.68 billion, representing a year-on-year increase of 68% and a month-on-month increase of 6%. Total second-quarter 2026 revenue reached NT$12.7 trillion, up 36% year-on-year. The bank maintains its full-year revenue growth forecast of 34%.
June Memory Contract Prices Largely Stable, Undersupply May Persist Until 4Q27
The average contract price for 8Gb DDR5 increased from $11.88 in May to $12.25 in June, while the average contract price for 8Gb DDR4 rose from $17.10 to $17.60. NAND Flash contract prices remained largely stable, with the average contract prices for 256Gb TLC and 512Gb TLC holding steady at $12.32 and $24.60, respectively. Following several consecutive months of rapid price increases, the pace of growth in memory prices slowed marginally in June. However, the bank maintains its view that the industry's undersupply will last at least until the fourth quarter of 2027 and believes that any price correction in 2028 is likely to be more moderate compared to previous cycles. For specialized memory, the capacity shift by general-purpose memory manufacturers towards AI-related products is expected to create a capacity substitution gap, leading to a continued undersupply situation projected to last until the second quarter of 2027.
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