The Wall Street Journal (WSJ) said the recent surge in semiconductor stocks is different from the dot-com bubble of the 2000s because the rally is based on first-quarter results and steady outlooks. Still, the WSJ said investors should beware of overheating.
On the 9th (local time), the WSJ reported in an article titled "Semiconductor stocks show no signs of slowing their blistering run" that "the recent share-price gains of semiconductor manufacturers are powered by dazzling first-quarter results and even more impressive outlooks, a stark contrast to the dot-com bubble era when many corporations had little to no revenue."
According to the WSJ, Intel's share price has jumped 239% this year and SanDisk's 558%. The market capitalization of semiconductor corporations in the S&P 500 increased by about $3.8 trillion (about 5,560 trillion won) in just the past six weeks. Over the past year, SanDisk shares rose 4,039.7%, Micron 769.8%, and Intel 483.2%.
Semiconductor manufacturers posted strong results thanks to unending product demand from AI corporations. As Generative AI models evolve, demand has surged for every type of chip, including not only graphics processing units (GPUs) but also central processing units (CPUs) and memory semiconductors. In particular, this year Anthropic's latest AI model earned praise for its agent features, and demand has surged for the memory and CPUs needed to generate vast amounts of data around the clock.
This week's stock gains are grounded in strong results. Analysts expect memory maker Micron Technology to post $107 billion in revenue (156.4 trillion won) and $77 billion in operating profit (112.6 trillion won) this year. Micron Technology recorded an operating loss in 2023 due to low memory prices. Dennis Chisholm, a director at Fidelity Investments (FMR LLC), said "revenue growth is very strong."
Of course, some analysts warn that the similarities to the dot-com bubble era are too striking to ignore the froth. Some also said the long-term outlook is uncertain. But semiconductor stock prices are rising day after day. Intel rose 14% on the 8th after reports that it had signed a preliminary chip manufacturing deal with Apple. Micron rose 15.5% the same day.
Barclays analysts told clients in a letter on the 6th to "remember that moves that are 'extreme' relative to common thinking can persist longer."
Peter Feinberg, a retired lawyer in San Francisco who has invested in Broadcom and TSMC, said, "The most dangerous words for investors are 'this time is different,'" adding, "I think the market is overvalued."