Semiconductor earnings momentum remains at peak
The bullish momentum in semiconductor and AI-related stocks may persist despite peak upward earnings revisions, as historically these peak levels can endure for multiple years.
The argument
Laurie Calvesina of RBC argued that while semiconductor upward revisions are at peak levels and valuation concerns are rising, historical cycles show these peaks can last for years. Micron's upcoming earnings were highlighted as a key test of whether hyperscaler wealth transfer to chipmakers remains sustainable.
The thesis, stress-tested
✓ What validates it
- ✓Micron's upcoming earnings report beats expectations
- ✓Hyperscalers maintain or increase CapEx guidance
▸ Risks discussed
- ▸High expectations priced in after massive rallies
- ▸Potential limits to hyperscaler spending power
Hear it yourself
"a situation in the equity market where we have very, very strong earnings tailwinds that are running up against very stiff headwinds on the PE side. And you tend to get compression in the PE, right, when you have higher inflation, higher interest rates. But so far in our modeling, it looks like the earning story is strong enough to offset those headwinds from compression. So I would say right now, earnings matter more. At this point, a lot of people keep talking about that. And yet, you take a look at some of the earnings, they've been driven by names that have pricing power."
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