Weak Forecast or Realistic Forecast without inflating prices?
Deciphering the recent semiconductor surge and dumps before AMD earnings. As geopolitical tensions, fed cuts uncertainties, and election uncertainties looms, we saw several companies (Eli Lilly, AMD, Chipotle, etc) keeping a more conservative outlook for the next quarter just to keep things realistic. We see this as a good sign that prevents further escalation of inflation which is aligned with the Fed Reserve's focus of reviving job market without causing inflation again.
A lot of investors are still not coming to terms with that and trying to make sense out of this earning season hence the dumping starts.
If those companies will to project high growth next quarter, it might be at the expenses of the consumers (inflating prices again to boost the balance of growth and gains). But they didn't, which will help the Federal Reserve to make more rate cuts to boost consumer and business spending. They are well aware that increasing prices will do harm and there is clearly a good sign for the Federal Reserve.
We expect that in a lower rate environment, the pullback of corporate gains will help to improve the outlook in 2025.
AI spending is still sustainable and strong in growth as much as the naysayers would love to speculate on the less stellar forecast of AMD. The recent earnings calls of Microsoft and Meta have made a strong case for AI growth despite AMD's conservative projection: Microsoft is not fast enough in setting up servers for AI demand, Meta sees the need to continue spending more on AI.
The need to lower costs in the long haul and to provide cheaper alternatives to small businesses without impacting on competitiveness present growth opportunities for AMD.
These are clear evidences that in such an uncertain environment, AI will see strong continuous growth with a more conservative outlook of not passing most of the costs to consumers and small businesses.
AMD, NVDA, DELL, QCOM, ARM, LRCX, TSM, AVGO are well positioned to weather the uncertainties in the market and will be the forerunners after further rate cuts and after elections.
Modify on 2024-10-31 14:09
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