‘Semicaps overbought on AI hype,’ argues Needham & Company
‘Semicaps overbought on AI hype,’ argues Needham & Company
AMAT
-0.44%
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KLAC
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AEIS
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ACLS
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ONTO
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NVMI
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NVDA
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Needham & Company downgraded Axcelis Technologies (NASDAQ:ACLS), Advanced Energy Industries (NASDAQ:AEIS), Applied Materials (NASDAQ:AMAT), KLA Corporation (NASDAQ:KLAC), Nova Measuring Instruments (NASDAQ:NVMI), and Onto Innovation Inc. (NYSE:ONTO) to Hold in a note Wednesday, stating that semi-caps are overbought on the AI hype.
Analysts explained that the firm doesn’t believe the surge in demand for AI systems will have a meaningful effect on foundry/logic and memory utilization rates or catalyze higher WFE spending in the near term.
«We believe incremental wafer demand at TSMC from NVIDIA‘s demand upside amounts to only a few thousand incremental wafer starts per month over the next year (~10% of the output of a single 5nm fab at TSMC or ~2.5% of TSMC’s total 5nm capacity),» the analysts wrote.
«Additionally, as hyperscale budgets are likely constrained in the near-term due to the challenging macroeconomic environment, we believe AI servers will cannibalize compute servers.»
Later in the note, they stated that with only ~10% or less upside over the next 12 months, they do not believe there is enough reward to justify buying these stocks given the risks that include P/E multiples contracting over the next 1-2 years from near peak levels, WFE not reaching the firm’s forecast of $110bn by 2026, and the companies failing to reach their target operating models by 2026.
