Don't copy the bottom! GAM warns that the sell-off in global chip stocks is not over, and the wave of revaluation may continue until the end of the year

The Zhitong Finance App learned that Paul Markham, head of GAM's global stock business, said that the global chip stock sell-off wave has not yet constituted a buying opportunity because investors' positions are still too crowded.

In an interview, Markham said, “There are too many people standing on the same side of the boat, and there will always be excessive holdings.”

The sell-off in semiconductor stocks accelerated on Tuesday, and investors increasingly questioned whether high valuations and the unprecedented wave of AI investments could continue. Earlier, it was reported that a Chinese state-owned enterprise has begun mass production of immersive DUV lithographs, and concerns about growing competition from China have further exacerbated this trend.

Even so, Markham anticipates that the broader AI investment logic will remain intact. He said the fundamentals of some AI-related stocks are still strong, and investors should be willing to pay higher premiums to companies like SK Hynix as profit margins expand and pricing power increases.

Markham believes that lower summer trading volume has amplified a period of volatility, making intense sector rotation more likely. His suggestion is to continue participating in technology stocks with a lower weight and wait for opportunities to increase positions in the coming months.

“I do think there will be an intermittent and suspension in the market, which may continue until later this year,” he added.

In addition to GAM, Morgan Stanley's chief stock strategist Mike Wilson also issued a warning: the momentum in the semiconductor sector is running out, the high point of the Philadelphia Semiconductor Index has fallen by nearly 14%, and capital is rapidly shifting to AI supercomputing giants such as Microsoft, Amazon, and Meta, as well as to the consumer and biotech sectors.

Steve Sosnick, chief market analyst at Yingtou Securities, has an even sharper question: “We've never seen such extreme profit growth, but the question that comes with it is, how long can we expect this growth to last?” According to LSEG Lipper data, in the week up to the end of June, funds tracking US semiconductor stocks recorded an outflow of about 11 billion US dollars, setting the record for the largest weekly outflow in the century.

According to Goldman Sachs brokerage data, hedge funds are withdrawing funds from technology stocks and semiconductor sectors at a record pace, and have shown net sales for many consecutive weeks over the past two months. Goldman Sachs partner Richard Privorotsky advised investors to buy VIX call options as a hedge against tail risk.

Bank of America's chief strategist Michael Hartnett issued a warning at the macro level: the bond market is becoming the biggest threat to the AI bull market. The 30-year US Treasury yield has risen to 5.2% (highest since 2007), and the actual yield has reached 3%. The tightening of financial conditions has surpassed the support of corporate profits. If the bond market “cuts off supply” and forces the Federal Reserve to raise interest rates, it will trigger a new round of deleveraging risk assets.

Squeeze the bubble or the gold pit?

In stark contrast to the cautious, some analysts believe that this round of correction is just a good layout opportunity.

Goldman Sachs analyst James Schneider drastically raised SanDisk's target price from $1,200 to $2,200 and reaffirmed the buy rating. He expects SanDisk's 2026 adjusted profit to be nearly 30% higher than market expectations, thanks to a surge in orders from major cloud computing providers. Citigroup analysts also reiterated the target price of 2,500 US dollars, which has room for an increase of nearly 50% compared to the current stock price.

Matthew Bryson, an analyst at Wade Bush Securities, said that the storage industry “is still in a very good position” and that Micron and SanDisk are benefiting from strong demand, especially the increase brought about by the development of AI. As construction of new production facilities takes time, chipmakers are still unable to quickly increase supply.

Bank of America also gave a “reverse bullish” interpretation of the rumor that Nvidia Kyber racks were delayed: this decline is essentially a “contraction in demand under supply constraints” rather than a trend reversal. The pattern of short supply of high-end CCL and ABF substrates will continue until the end of 2027, and “what falls out is the buying point”.

Goldman Sachs also remains optimistic about the Korean stock market, maintaining the KOSPI index target of 12,000 points. The core support comes from 320% profit growth expectations for the full year and a historical undervaluation of 6.65 times.