Technology and chip stocks experienced a sharp pullback after the U.S.-China summit concluded last week without a major semiconductor breakthrough. Nevertheless, they regained their footing only a few days later as expectations for hyperscaler spending rose with Nvidia’s earnings prospects.
Those prospects were fulfilled on Wednesday afternoon when the AI chip giant once again thrashed Wall Street’s quarterly forecasts, earning $1.87 per share versus Wall Street’s estimate of $1.77. Nvidia also beat on the revenue line with sales of a staggering $81.62 billion compared with an estimate of $79.18 billion.
Rex Berger, private wealth manager at Generation Capital Advisors, says he never saw the China summit as a type of gamechanger for the semiconductor sector as many others did. In his view, the total addressable market for semiconductors remains extraordinarily robust, driven by secular trends that transcend geopolitical headlines: AI infrastructure buildout, automotive electrification, data center modernization, and Internet of Things expansion.
“These demand drivers are measured in decades, not summit cycles,” Berger said.
He added that China's push for semiconductor self-sufficiency is indeed real, but in his view the technological moat protecting leading-edge chip design remains formidable. Achieving parity in advanced nodes requires ecosystem depth, equipment suppliers, materials expertise, talent, and decades of iterative R&D, according to Berger.
“Summit outcomes don't alter the underlying economics driving enterprise AI adoption and hyperscale infrastructure spending. The fundamentals: global AI infrastructure spending is projected to exceed $1 trillion over the next five years. Hyperscalers have committed to unprecedented semiconductor-intensive capex. Enterprise AI adoption is still in early innings, most companies are piloting, not scaling,” Berger said.
Clint Sorenson, chief investment officer at Ascentis Asset Management, meanwhile, viewed the initial semiconductor pullback as a classic “sell the news” event following the conclusion of the U.S.-China summit. In his opinion, global AI spending is expected to continue moving higher, as the AI race remains very much alive and well.
“Until the trend changes or sentiment shifts meaningfully negative, we remain constructive on the sector, which remains a major beneficiary of AI capex spending,” Sorenson said.
Sorenson does view geopolitical conflict, trade negotiations, export controls, and fractured supply chains as part of the broader “deglobalization” megatrend.
“Deglobalization, the AI race, and energy dominance are, in our view, the three most important megatrends driving the global economy today. They are therefore of paramount importance in portfolio allocation. We believe a diversified approach is the best way to capture these trends. On one hand, the key constraint on AI is increasingly physical: power, land, water, materials, and infrastructure. As a result, we believe we are in the midst of a real asset supercycle,” Sorenson said.
He expresses that view through allocations to commodities, infrastructure, and industrial real estate. He also sees significant opportunities in sectors that have been underinvested in for the past two decades like metals and mining stocks, water-related utilities, and materials companies facing structural supply-and-demand imbalances.
“The trend in semiconductors remains positive, and therefore the rally remains intact. AI demand continues to exceed expectations, while supply constraints in materials, memory chips, power, water, and labor are creating an environment of rising prices. However, the longer the U.S.-Iran conflict continues, the more entrenched and contagious inflation could become,” Sorenson said.
Elsewhere, Matt Dmytryszyn, chief investment officer at Composition Wealth, views large-cap tech and AI-related investments as being fairly isolated from geopolitical risks like the China summit. The significance of spending by hyperscalers lowers the sector's elasticity to geopolitical and macro factors in his opinion and he still believes the AI and semiconductor rally remains rooted in fundamentals.
“Eventually, we may reach a point where not all AI platforms have achieved broad adoption, and we may see excess capacity. At this point it's unclear which platforms will be long-term beneficiaries, and we believe it's too early for this concern to resonate in the prices of semiconductors and AI infrastructure stocks,” Dmytryszyn said.
Finally, Mary Ann Bartels, chief investment strategist at Sanctuary Wealth, says geopolitics may cause periodic volatility but it will not derail the long-term demand and growth for semiconductor chips.
“Expectations might be getting ahead of themselves with many of the chip stocks now rallying sharply. So, corrections should be anticipated and expected but we believe all pullbacks remain a buying opportunity. We expect the earnings for semiconductors to expand supporting their long-term bull market trend,” Bartels said.
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