By_Valueinvesting
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Disclaimer: The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment suggestions directly. feel free to leave comments than i will reply.
Recently, the Fed clearly announced that there will be 2 more rate hikes during the year and no rate cuts until January 2024.
Affected by this announcement, U.S. stocks fell drastically, where the semiconductor which had the decent performance was the hardest hit.
Actually, the stock performance of semiconductors are much better than the performance of the fundamentals.
For instance, $Samsung Electronics Co., Ltd.(SSNLF)$ , which just released its second quarterly report, showed the revenue of 60 trillion Han Won for the quarter, down 22.3% year-on-year and below market expectations of 62 trillion; while operating profit for the quarter was KRW 600 billion, exceeding market expectations of KRW 531.1 billion:
$Micron Technology(MU)$ , $Samsung Electronics Co., Ltd.(SSNLF)$ 's counterpart, has also released its earnings report. Up to June 1 this year, revenue and profit exceeded market expectations; however, according to the news of the earnings call, the next quarter is expected to pick up while the magnitude is not as large as the stock price rise.
Similarly, Samsung Electronics has the same problem with the bottom on the earnings and the stock rising 36% from its lows, which explains the 2.4% drop in the stock price after Samsung's earnings preview.
Likely, Micron saw its shares fall after the earnings report.
Looking ahead to the second half of the year, it is expected that the stock price in the semiconductor industry is difficult to soar as in the first half of the year; but thanks to the industry's cyclical recovery and rising demand for AI , it is expected that the fundamentals will be improved quarter by quarter.
Therefor, if the semiconductor has a decent pullback, investors are advised to pick up and add their positions.
The 2 reasons to be bullish on the semiconductors sector.
First, the current PB valuation from the industry giants is still below average, such as Micron PB of 1.5 times (Cyclical high valuation of about 2.6 times); the valuation of Samsung Electronics still has the room to go up.
Secondly, the semiconductor industry is greatly driven by the increasing demand of AI, such as the demand for DRAM memory in AI servers is 6-8 times higher than that of ordinary servers
I always believe that semiconductor stocks will reach new highs!
$Micron Technology(MU)$ $Samsung Electronics Co., Ltd.(SSNLF)$
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