Sugar rush fades
Funds tracking U.S. semiconductor stocks clocked outflows of around $11 billion in the week ended June 24, the biggest weekly outflow this century, according to LSEG Lipper data.
Sentiment on the sector has been just as volatile as performance recently. The funds recorded inflows of around $12 billion in the previous two weeks.
Analysts generally expect hyperscaler capex spending will remain high, with much of the anxiety about these stocks driven by what-if scenarios involving stock declines and capex cuts.
Global cloud and AI infrastructure capital expenditure is expected to approach $1.5 trillion by 2027, a 40% to 50% jump year-over-year, according to a BofA Securities note this week.
Bullish broker views
U.S. brokerages have bumped up their price targets, driven by expectations that insatiable AI demand will support earnings growth.
Among the S&P 500 chipmakers, Micron MU.O has the highest expected upside -- reflecting its current price vis-à-vis its consensus analyst target -- of more than 60%. Memory chipmaker Sandisk's shares SNDK.O are expected to rise over 30%, based on LSEG data.
Soaring memory prices due to tight supplies have boosted memory chip companies across the globe including SK Hynix 000660.KS, which jumped more than 10% in its U.S. trading debut on Friday following a $26.5 billion share sale.
Nvidia's shares are expected to climb over 40%.
But other big semiconductor companies are trading around their median 12-month price target, indicating much of the upside may be priced in.
"I consider elevated price targets to be rather a consequence of the incredible momentum in semis rather than a reliable indicator of future performance," said Alexander Lis, chief investment officer at SD Ventures.
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