To The Moon

Yesterday, the semiconductor sector of the US stock market collectively fell. Among them, $Intel(INTC)$ plunged 5.37%, Broadcom fell 4.24%, $Qualcomm(QCOM)$ dropped 3%, and $ASML Holding NV(ASML)$ fell 2.93%.

In addition to semiconductors, tech stocks such as $Apple(AAPL)$ and $Tesla Motors(TSLA)$ also suffered a correction, driving the $NASDAQ(.IXIC)$ down 1.65% yesterday.

Is this collective correction a normal adjustment or a major fall after reaching a peak?

First of all, there is no bad news for semiconductors, and it is a spontaneous adjustment of the market.

Secondly, the important reason for the correction of semiconductors is that they have risen too much this year.

For example, AI leader $NVIDIA Corp(NVDA)$ has risen 73.6% this year, $Advanced Micro Devices(AMD)$ has risen 39%, and ASML has risen 28%.

After the surge, people naturally worry that semiconductors have created a bubble.

Take Nvidia as an example. Its current Price-to-sales ratio is as high as 35 times, which has exceeded the 34 times at the peak of the semiconductor bull market in 2021:

Similarly, AMD's Price-to-sales ratio is 14.6 times, which is also higher than that at the peak of the previous bull market:

However, unlike Nvidia's exploding earnings, AMD's revenue performance is relatively poor. For example, in the first quarter of this year, analysts expect revenue growth of only 1.7%:

The lithography giant ASML is facing the same problem. On the one hand, its Price-to-earnings ratio has reached 44 times. On the other hand, the market expects its revenue in 2024 to be the same as that in 2023, and it is likely to resume high growth in 2025:

In such contrast, the slightest disturbance of sharply rising stock prices may trigger a correction.

However, despite the large increase in semiconductor stock prices, there is still room for upside when viewed over a longer period of time.

First, AI giants led by Nvidia still have lower valuations compared to the Four Horsemen (Intel, $Microsoft(MSFT)$ $Cisco(CSCO)$ $Dell Technologies Inc.(DELL)$) during the dot-com bubble in 2000:

Secondly, the valuations of the $S&P 500(.SPX)$ and the big tech companies are not what they were during the dotcom bubble: