Semiconductor upcycle faces eventual cyclical rollover
The guest argued that while the semiconductor sector's extraordinary earnings growth could push valuations higher in the near term, the industry remains structurally cyclical and vulnerable to double-ordering.
The argument
Dawson pointed out that forward earnings estimates for the semiconductor index have doubled since October, keeping valuations below prior peaks of 32x, but warned that hoarding and over-ordering will magnify the eventual downside.
The thesis, stress-tested
✓ What validates it
- ✓Semiconductor index valuation reaching 32x forward earnings
- ✓Inventory build-up or lead-time contractions in memory or logic chips
▸ Risks discussed
- ▸Double-ordering and hoarding inflating current demand
- ▸Valuations re-rating back to peak multiples of 32x
Hear it yourself
"Like, you know, at the end of the day, this is just making the Strait Of Hormuz less relevant over the long run. But that's the long run. Like, the near term is, I think, what the oil markets are are looking at today or or oil analysts are looking at today and saying, you know, maybe we're whistling past the graveyard. The hard part about all of this is that, you know, we we often have right, like, you can't trade a taco. Like, we could find ourselves in a very different situation very quickly, which is one of the reasons why people have been so calm even in the face of this."
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