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NVIDIA CEO quells neocloud borrowing cost concerns.
SOXX drops, but historical data shows a rebound is likely.
Memory Names Fall on China Competition, Kospi Buyback Ending
Memory-related names such as Micron ((MU - Free Report) ),SanDisk ((SNDK - Free Report) ), and SK Hynix ((SKHY - Free Report) ) have been some of Wall Street’s best performers, amid a memory chip shortage and exploding demand. However, these stocks have been crushed in October. China’s leading memory manufacturer, ChangXin Memory Technologies (CXMT), announced a major technological breakthrough that boosts its chip density by 30-50%. Investors fear that, with Chinese competition, supply will flood the market and prices will crash. Additionally, memory stocks have fallen further as Samsung and SK Hynix’s massive buyback programs ended.
Despite CXMT’s breakthrough, the selling is likely overdone for a variety of reasons:
1. The technology gap remains large.
2. CXMT is nowhere near mass-producing these ultra-complex chips.
3. CXMT will struggle to acquire the technology needed to produce these chips because of U.S. export controls.
With the recent sell-off, Micron shares are now extremely cheap. The memory leader sports a P/E ratio of just 12x, while Wall Street analysts expect revenue and EPS to grow at a triple-digit clip.
Image Source: Zacks Investment Research
Neoclouds Plunge on CoreWeave Debt Anxiety
Neoclouds, the specialized cloud infrastructure providers that deliver high-performance graphics processing units (GPUs) and accelerated computing for artificial intelligence companies, fell this week amid debt concerns. On Wednesday, CoreWeave ((CRWV - Free Report) ), a Bitcoin miner turned neocloud, plunged 15% after a chart circulated on Twitter showing rising borrowing costs. Originally issued in June with a 9.625% coupon, the yield on CoreWeave’s $1.25 billion senior unsecured notes due 2032 violently spiked to 15%.
Image Source: Zacks Investment Research
NVIDIA ((NVDA - Free Report) ) is the dominant AI chipmaker and a partner and investor in CoreWeave. Thursday, NVIDIA CEO helped to quell the debt concerns surrounding CoreWeave, saying “NVIDIA does not need to backstop CoreWeave. CoreWeave’s cost of capital is actually decreasing, and its strength is improving every day.”
Semiconductor Selling Intensifies
Amid hotter U.S. inflation, AI debt concerns, and the pressure on memory stocks, the iShares Semiconductor ETF ((SOXX - Free Report) ) has fallen for 8 consecutive sessions, marking its longest losing streak since 2010. The good news for investors is that in the past six instances where the SOXX declined for 8 straight sessions, it gained ground 2 days later 100% of the time.
Image Source: Bluekurtic Market Insights
Bottom Line
While recent macro pressures, Chinese technological breakthroughs, and AI debt anxieties have pressured the semiconductor sector, history suggests this sharp pullback may be an overreaction.
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Image: Bigstock
Memory & Neocloud Panic: Time to Buy?
Key Takeaways
Memory Names Fall on China Competition, Kospi Buyback Ending
Memory-related names such as Micron ((MU - Free Report) ), SanDisk ((SNDK - Free Report) ), and SK Hynix ((SKHY - Free Report) ) have been some of Wall Street’s best performers, amid a memory chip shortage and exploding demand. However, these stocks have been crushed in October. China’s leading memory manufacturer, ChangXin Memory Technologies (CXMT), announced a major technological breakthrough that boosts its chip density by 30-50%. Investors fear that, with Chinese competition, supply will flood the market and prices will crash. Additionally, memory stocks have fallen further as Samsung and SK Hynix’s massive buyback programs ended.
Despite CXMT’s breakthrough, the selling is likely overdone for a variety of reasons:
1. The technology gap remains large.
2. CXMT is nowhere near mass-producing these ultra-complex chips.
3. CXMT will struggle to acquire the technology needed to produce these chips because of U.S. export controls.
With the recent sell-off, Micron shares are now extremely cheap. The memory leader sports a P/E ratio of just 12x, while Wall Street analysts expect revenue and EPS to grow at a triple-digit clip.
Image Source: Zacks Investment Research
Neoclouds Plunge on CoreWeave Debt Anxiety
Neoclouds, the specialized cloud infrastructure providers that deliver high-performance graphics processing units (GPUs) and accelerated computing for artificial intelligence companies, fell this week amid debt concerns. On Wednesday, CoreWeave ((CRWV - Free Report) ), a Bitcoin miner turned neocloud, plunged 15% after a chart circulated on Twitter showing rising borrowing costs. Originally issued in June with a 9.625% coupon, the yield on CoreWeave’s $1.25 billion senior unsecured notes due 2032 violently spiked to 15%.
Image Source: Zacks Investment Research
NVIDIA ((NVDA - Free Report) ) is the dominant AI chipmaker and a partner and investor in CoreWeave. Thursday, NVIDIA CEO helped to quell the debt concerns surrounding CoreWeave, saying “NVIDIA does not need to backstop CoreWeave. CoreWeave’s cost of capital is actually decreasing, and its strength is improving every day.”
Semiconductor Selling Intensifies
Amid hotter U.S. inflation, AI debt concerns, and the pressure on memory stocks, the iShares Semiconductor ETF ((SOXX - Free Report) ) has fallen for 8 consecutive sessions, marking its longest losing streak since 2010. The good news for investors is that in the past six instances where the SOXX declined for 8 straight sessions, it gained ground 2 days later 100% of the time.
Image Source: Bluekurtic Market Insights
Bottom Line
While recent macro pressures, Chinese technological breakthroughs, and AI debt anxieties have pressured the semiconductor sector, history suggests this sharp pullback may be an overreaction.