Bloomberg "AI Semiconductor Stocks Plummet, Not Due to Demand Collapse but Margin Call Bomb"

▲ Data Center, Memory Semiconductor, SpaceX (SPCX), Stock Price Decline / AI Generated Image

An analysis suggests that the sharp decline in AI semiconductor stocks is not due to a collapse in demand, but rather a combination of slowing price increases and leverage liquidation. The release of SpaceX (SPCX)'s $101 billion escrow is also emerging as a key variable that could increase tech stock volatility.

Bloomberg TV reported on August 6 (local time) that memory semiconductor stocks collectively weakened as the revenue forecasts for SanDisk (SNDK) and Western Digital (WDC) fell below market expectations. SanDisk has risen 460% since the beginning of the year, and Western Digital has risen 200%. While both companies still recorded triple-digit revenue growth, the product price increases that continued for the past 3-4 months were assessed to have passed their peak.

Mandeep Singh, an analyst at Bloomberg Intelligence, diagnosed that “it's less about a problem with the companies' business fundamentals and more about the market structure shaking stock prices.” He explained that with reduced trading volumes, some selling combined with margin calls led to a larger decline. He predicted that demand for AI infrastructure would continue, citing robust sales growth and Q2 earnings indicating increased capital expenditures.

SpaceX was identified as a new major cloud company expanding AI infrastructure investments. The company plans to increase its power capacity next year, aiming for $100 billion in annual recurring revenue. However, with the release of approximately 911 million shares, worth $101 billion, from escrow, the possibility of initial investors and employees realizing profits has increased. Tradable shares more than doubled from 640 million the previous day to 1.5 billion, and short-selling accounted for 36% of the trading volume on the preceding trading day.

Emily Green, Head of Wealth Management at Ellevest, emphasized the need to distinguish between long-term belief in large tech stocks and investment strategy. Five stocks—Microsoft (MSFT), NVIDIA (NVDA), Amazon (AMZN), Meta (META), and Alphabet (GOOGL)—accounted for 83% of the S&P 500's gains in one week. Green stated, “Expecting stock prices to rise forever is not a strategy,” and advised realizing some profits and diversifying into international markets, considering massive investment expenditures, debt, and intensifying competition.

Warnings also emerged that leveraged products could create larger stock price fluctuations than corporate earnings. Alex Chaloff of Bernstein Private Wealth Management stated that while leveraged ETFs account for only 2% of total ETF assets under management, they comprise 20% of daily trading volume. In the private market, the value of 14 major investments has effectively approached zero, with an additional six potentially defaulting by year-end. Chaloff explained that performance is improving outside of tech stocks, in industrials, defense, and banking, with industrials recording a Q1 profit growth rate of 20%, significantly exceeding the estimated 3%.

[Article Key Summary]

-While business growth for SanDisk and Western Digital was maintained, slowing product price increases and margin calls put pressure on stock prices.

-SpaceX's tradable shares increased to 1.5 billion due to the release of $101 billion worth of escrow.

-An analysis found that leveraged ETFs, accounting for 20% of daily trading volume, are amplifying tech stock volatility.

*Disclaimer: This article is for investment reference only, and we are not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*