To The Moon

The market’s favorite has been changing over years as ChatGPT concept is the most-heated topic. While back in 2021, new energy vehicle was the beloved one.

New King - Semiconductor

Since the end of last year, ChatGPT concept has become very popular. The AI sector has also risen accordingly. The ChatGPT concept in the US stock market has risen by 30%.

Since this year is a technology bull market, the chip behind artificial intelligence will naturally not be absent. On April 6, the ChatGPT official announced the suspension of the Plus version (a $20/month subscription version).

The reason is due to the tightness of the computing power and the increased demand for high-end chips. With the development of the AI, the demand for high-performance GPUs will also increase.

In addition, the market generally views that semiconductor industry is approaching the bottom of the down cycle.

It’s known to us that semiconductor is a cyclical industry. In 2022, the global economic growth was weak due to the impact of factors such as the energy crisis caused by local geopolitical conflicts and the currency fluctuations caused by the Fed's interest rate hikes.

However, in the third quarter, industry inventory reached its peak, and the process of destocking began. In 2023, the inventory level may gradually return to a relatively safe level, and the industry may usher in a bottoming reversal.

The end of semiconductor industry down cycle and demand growth driven by ChatGPT have driven the semiconductor sector up.

$NVIDIA Corp(NVDA)$

Old Favorite - New Energy Vehicles

Recently, Buffett has sold $BYD COMPANY(01211)$ for the 10th consecutive time, which has led to a continuous blow to market confidence in new energy. In the past 1-2 years, new energy was also as popular as ChatGPT today.

In 2021, the new energy industry reached its peak and its valuation soared.

At that time, under subsidy policies of countries around the world, the new energy industry experienced explosive growth. In 2021-2022, the new energy industry reached the peak of its trend, leading to a surge in the market value of new energy.

At the end of 2021, $Tesla Motors(TSLA)$ had reached $414.5, and $BYD COMPANY(01211)$ also exceeded HKD 300. Many people have a stereotype of high valuation for new energy.

However, this also foretells the performance of the next 2-3 years. At this time, the stock price of new energy has fallen back, and the valuation has dropped sharply to a low level of nearly a year.

New energy has entered a vicious competition phase.

In addition, the current new energy automobile industry is in a phase of vicious price competition.

In early 2023, Tesla significantly reduced its prices, with an overall reduction of 20,000 - 48,000. The competition pattern of the automobile industry has also begun to deteriorate gradually.

On April 2, Tesla, which led the "price war," announced its first-quarter car sales, with the delivery of 423,000 cars, a year-on-year increase of 36%.

Although it exceeded the market's expectation of 420,000, the market didn’t buy it as its margins fell. Analysts have different views on this.

JPMorgan gave a bearish report, believing that

Tesla's full-year delivery expectations for 2023 doesn’t increase after the price cuts.

All things are cyclical

Howard Marks, with a recent annualized return rate comparable to that of Warren Buffett, wrote in the book of Mastering the Market Cycle that

cyclical balance experiences the shortest time.

That is, stock prices will always fall too much or rise too much due to excessive panic or optimism."

Investors who have experienced several rounds of sector rotation will find that every cycle is same, including this cycle of ChatGPT.

Sector rotation in the market has always been like this, with old kings and new favorites.

Between new energy and semiconductors, which one would you choose?

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