Bloomberg Surveillance TV: July 28th, 2026

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Jonathan Ferro** (0:11)
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferro, along with Lisa Abramowitz and Annmarie Hordern. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 to 9 AM Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always, on the Bloomberg Terminal and the Bloomberg Business app.
We begin this out with the chip sell-off building. Cameron Dawson of NewEdge Wealth writing the following, the semiconductor profit cycle depends on two big factors. Hyperscale is continuing to spend aggressively and limited new competition entering the space that could challenge margins. Markets seem to be questioning both. Cam joins us now for more. Cam, good morning. Good to see you.

**Cameron Dawson** (0:54)
Good morning.

**Jonathan Ferro** (0:55)
That quote just perfectly illustrates this moment we're in right now. We are questioning both. Do you think it's valid to question both?

**Cameron Dawson** (1:01)
I think it is, but I think before we get to the fundamentals, we have to appreciate the technicals because so much of the upside was driven by positioning chases and squeezes and flows. And so what we're experiencing now is effectively the mirror image of that. Because flows were so aggressive into leverage products within the semiconductor space, not just in the US, but of course, in South Korea, what we're seeing is the dynamic is that as that leverage unwinds, you're seeing a lot more downside. Effectively, these stocks got so overbought by the time you got to the middle of June, that even though we've seen things like a 40% drawdown in something like SK Hynex, you're technically not oversold yet. So if you look at a name like Micron, yes, it's down over 20%, but it's still 40% above its 200-day moving average. You can say the same thing for the stocks overall. So it's important to remember, narrative follows price. So all of these negative narratives on the fundamentals we're talking about, it's effectively just following the negative price action.

**Jonathan Ferro** (1:56)
So is this a price move looking for a narrative or is there a story here?

**Cameron Dawson** (2:00)
I think it's a matter of both. I think some of the dynamic that we saw in the upside move was ignoring the fact that a lot of these capacity additions, while you're thinking about Micron itself adding capacity, SK Hynex, Samsung adding capacity, and now China adding capacity, we've all known this for the last six months over a year because we've known that there has been a capacity shortage. But now the market is starting to wake up to it. At the end of the day, you had this clarion call from big bowls on things like Micron saying, of course, the 85 percent gross margin is sustainable. This time is in fact different. But this is still a very, very cyclical business. So given the fact that you are going to have capacity additions over the course of the next few years, you will see downward pressure on those gross margins. The big difference or the big thing to watch is that, is there any downward pressure on the revenue line? Because that's really when you start to see the de-leveraging and the operating leverage of these businesses. And if you continue to see weakness within the hyperscaler names, the question that we have been asking is, if the stocks continue to get pressured, will they continue to raise capex?

**Lisa Abramowitz** (3:04)
At the same time, there's this issue of exactly whether the economics are changing and moving away from certain companies. And I'm thinking of, say, the closed models, like the open AIs and the anthropics that are suddenly coming under pressure from open source models that are coming out of China but are being adopted rapidly by a lot of US companies. I mean, the search for cheaper models is definitely taking steam. Do you think that does fundamentally alter the tech story?

**Cameron Dawson** (3:31)
Yeah, because I think the big question that you have is a scaling factor. We know that we are getting growth because of some of this capex investment, but effectively the growth is coming in slower than what the capex investment is. So you can see that by looking at free cashflow. Free cashflow for a name like Google was negative in the corner because their capex is growing faster than their operating cashflow. You go to 2027, that's going to be the case for all of the hyperscalers. And so you're going to have a world where capex grows faster than operating cashflow. You're not seeing it show up in the operating fundamentals yet. And this is in a world where we're still thinking that we're going to be at the leading edge and those are going to be the areas, those leading edge models are going to be the areas that drive growth. If you have competition, then you could still be in a world where capex continues to grow faster than operating cash flow, not just in 27, but potentially in 28 That of course would come in to ahead with where consensus is, simply because consensus is expecting a big acceleration in operating cash flow in 28