Is the AI euphoria going to continue this week?
Following the stellar performance of $NVIDIA Corp(NVDA)$
As innovative and disruptive applications of AI continue to emerge, more AI-capable chips will be required to drive the AI engines. Hence, I believe that AI is going to be increasingly significant contributions to the top lines of chip makers the likes of Nvidia and Marvell, as well as semiconductor foundries such as $Taiwan Semiconductor Manufacturing(TSM)$
However, a probable disastrous default by the US government may cap or even reverse the bullish trend of the semiconductor sector that is particularly sensitive to economic cycles and interest rates. Despite a respite from an agreement between the White House and the House Speaker on a debt ceiling deal over the weekend, it still has the difficult task of passing through the Congress and essentially gaining the approval of the hardliners among the Republicans in the House of Representatives. As the dateline of 5 June for Congress to lift the debt ceiling draws nearer, the US federal government credit rating is at risk of being downgraded, plunging the already fragile US economy into a deep stagflation amidst the double whammy of recession and high inflation.
Hence, while I maintain my bullish stance on the broad semiconductor sector against the backdrop of the exploding AI demands, I’m not going to throw my kitchen sink into it, as it will be prudent to size one’s investment in a position appropriately based on his or her risk tolerance and affordability.
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