EP 182: AI Fatigue , Meta's Neo-Cloud Rumors , and Samsung's Foundry Comeback

**Ben Bajarin** (0:05)
Hello, everyone. Welcome to another episode of The Circuit. I am Ben Beharren.

**Jay Goldberg** (0:10)
Greetings, programs. I'm Jay Goldberg.

**Ben Bajarin** (0:13)
All right, so let's start off with, what's happening in the market? And I know there's like two things. Obviously, we are at the six month timeframe. So, you know, I've heard people, you know, articulate that there's been rebalancing, right? Six months that goes on with some funds, and there's some of that. There's also continued, what do you want to say? Skepticism, I guess, that just still lingers around a lot of these markets, but that's not, I don't think, the bloodbath that ensues. So like, what is the six month read, I guess, you know, where we're at on market sentiment?
Like, what's our six month take, I guess, is, and what's structurally happening at the moment?

**Jay Goldberg** (1:06)
Yeah, so the market had a bad, semi-stocks had a bad week in the market.

**Ben Bajarin** (1:10)
Very bad week.

**Jay Goldberg** (1:12)
And this comes off, what, two weeks ago, when it was last week, it was also not a great week. It got, sorry, last week was not a great week, but then Micron kind of saved it, but then Micron actually ended up down for the week.

**Ben Bajarin** (1:30)
Very bad.

**Jay Goldberg** (1:31)
So, and now it's down a lot more. And I think there is an element of just fatigue with the AI trade. I will say that when I was at Computex, I think we touched on this before, when I was at Computex last month, I was hanging out with specialist investors, people who just focus on semiconductors, right? Not generalists who cover the whole market, but people who have been trading semis, deep in semis for years. Thank you for listening.
Right. And one comment I kept hearing over and over again, is that people were a little bit nervous because there were, quote, too many tourists in the trade. Meaning, meaning people who were generalists, semiconductor, generalist investors, new to semis, also especially retail investors, very new to semis, not used to ups and downs.
There was just a sense that semis had done so well this year that there were a lot of people sort of piling in, in sort of March, April, May, that were driving valuations to places that couldn't necessarily be supported by fundamentals at the time. And the market apparently agrees with that sentiment. And things sold off this week, right? And of course, it sparked a whole set of debate about, oh, it's over, AI is a bubble. We're starting to hear that again. I think we can debate what's going on, but I think a lot of this just was, there was a perception that semis were going to go up forever. And a lot of stocks probably got ahead of fundamentals. I think that's what's driving this. Because there were no other clear catalysts in the market, right?
It's been trading through the war news and the interest rate news. AI stocks have done well through all that. There was no real news this week. I think it was very much a change in sentiment. Maybe you're right, it's sort of the six month rebalancing, but usually you don't see that until, you know, it started before the end of the month. Usually you don't see that kind of stuff until after the end of the month.
So I don't know what's going on. I don't know what things are worth. I just think there was a lot of momentum, a lot of sentiment in the market, and now that's sort of revising itself.

**Ben Bajarin** (4:04)
So I think your read on the tourists and the retail, I think is particularly apt. I've heard this too, and I think this comes back to what we've said for a long time, right? Like even if it's not a fundamental bubble in terms of the build out, right? The thing that can impact anything is if capital gets spooked, and retailers get easily spooked, right? So would perhaps your semiconductor tourist. And so I think there's two ways I think about this. And there are a lot of companies who I do think are having their valuations or whatever is going on on that dynamic of retail and investors. And then there's others where I just wonder if the play is, just be convinced on your fundamentals and stick with some of those, because there's a lot of healthy companies out there, generating free cash flow, still growth. I mean, NVIDIA is an example of this. I know that stock's done nothing, but if you just did an analysis on their fundamentals, they'd be pretty good, right?