Asked whether the AI stock selloff reflects a real change in fundamentals or just sentiment, Orton says expectations had risen so high that many names could no longer beat them, and crowded positioning has to unwind.
…digesting the most. So it's kind of surprising to me that a lot of the semiconductor complex, even the ones that have reported strong earnings and beat estimates, are still trading down through all of this because there's clear read-throughs to strong demand for them through 2029, even into 2030.
Mattis Ian jumping in here. Are you saying then that this is all sentiment-driven in a lot of cases? Have the investment fundamentals themselves changed particularly?
…business is really irrelevant to kind of long-term margin growth plans for the company. But I would say that what we're seeing, Ian, is that there was an incredibly high bar that investors put on these companies and everyone in the technology, AI supply chain, and even software now. So a lot of these names that were up 50, 100 plus percent so far this year, it's become an impossible bar to beat. I believe only 25% of AI technology companies that have beaten results have actually traded up on those results. And 25% of those names have been down more than 5%. So that asymmetry is very, very present. And I think that's the near-term challenge. Investors are still very long this trade. And we still have to, I think, work through some of those positioning challenges to get back to a base on which we can start to rally again.
Yeah, I mean, is there in some ways a reason to take comfort from this? I mean, there's been so much concern probably over the last 18 months to two years about leadership in the SP in particular being completely concentrated in a handful of tech names. I mean, is it a good thing if leadership…
Right. It is a good thing. I think that's a really important point, Ian, because we're being reminded or forced to be reminded by the market that there are a lot of other parts of the market, both from a global perspective and in the U.S., that are working really, really well. I think the challenge…
Matt, as I looked at some of the South Korean reaction today, it didn't really make sense to me because the demand picture is still so incredibly strong for the likes of SK Hynex and Samsung. Sure, we've been talking about potential for Chinese competition, but we've heard what DRAM HBM product is…