Chip Stocks Put Up Their Best Quarter Ever Despite Wild Swings

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.
This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead, with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily podcast with Carol Massar and Tim Stenovec on Bloomberg Radio.

**Tim Stenovec** (0:32)
You're not going to be surprised by this at all if you've been paying attention. We're talking, of course, about semiconductor stocks, heading for their best quarter ever, extending an extraordinary start to the year, driven by insatiable demand for AI equipment. But after recent jitters sent the stocks tumbling, investors are wondering how much further can the rally go?

**Carol Massar** (0:49)
Yeah. Let's see what Ian King has to say. He's Bloomberg News US Semiconductor reporter. He is in our Bloomberg News San Francisco beer. He is always our gut check. And reality check when it comes to the semiconductor world. Hey, Ian, it is good, great actually, to have you here with Tim and me.
Quite a run, quite a bounce back that we have seen in semis. The run in your view in the second quarter, is it justified against the backdrop of the fundamentals of these companies? And I think we have to be smart here, right? Because not every semi name is the same.

**Ian King** (1:21)
No, you're absolutely right. We've seen a huge run up overall, but some companies have run up way more than others. And if you look at what that's done for the valuations, then that's clearly something that investors can key upon and decide. At the moment, it looks like we don't really care. You've got a company like Intel, which I believe is the second best performer on the Sox this year, and it's trading at sort of above 500 times. Whereas a company like Micron, which I believe is still the best performer this year, is trading, I think, in the 20s.
So, there doesn't appear to be a huge amount of differentiation between companies that are generating really good earnings and companies that have still got to prove themselves. Maybe that is how things will pan out as we move forward.

**Tim Stenovec** (2:10)
You know, Carol taught me this great function on the terminal at the end of the first year of working together, where you can just look at member-ranked returns for certain categories. I just did that for the Sox, Ian. The worst performer so far this year, NVIDIA. Only up 6.5 percent.
It's notable, given that NVIDIA was kind of the company that, at least for a lot of people, started this all. It was the one that really surged back a few years ago and continued that surge. What has been NVIDIA's challenge this year?

**Ian King** (2:41)
I mean, just reading the reports and talking to investors, there is no problem. There's nothing wrong. The growth that it is showing from an incredibly high level at this point is still there. All of the demand drivers are still in place. It's getting new products out quickly. The new products are doing okay. So in terms of the fundamentals, it doesn't appear to be anything wrong. But what people have told me is that the story has changed.
We've switched.
Going back maybe two years ago, NVIDIA's position was absolutely unchallenged. You could say it's probably not challenged yet, but there is more talk, there's more stories, there's more narrative, that's looking at other companies and new offerings that might come in, that might begin to steal a little bit of market share from NVIDIA. So that's really what it's facing. It's more of a, the story isn't as fresh as it was, rather than there's anything fundamentally wrong.

**Carol Massar** (3:37)
So Ian, I had this great teacher, courtesy of Bloomberg, who has taught me about semiconductor cycles and how demand increases. And then you have semiconductors ramp up to meet that demand, and you have oversupply. That teacher is you.
And so I just, you know, dare I say is something different this time around. Are we seeing the build happen? Or I feel like we've had some conversations around this table with maybe Mandeep Singh and others, that companies are careful about not overbuilding or building too quickly. But where are we on that?

**Ian King** (4:15)
Yeah, I mean, that's sort of ongoing tension within the industry right now. We have all of this insatiable demand signalling going on. All of this capex spending keeps going up. And we're talking hundreds of billions of dollars that's been committed to spending on this gear. So the demand side is absolutely there. So then, well, why isn't supply ramping up to meet that? And primarily, that's the memory chip guys there, the kind of bottleneck at the moment.