Stacy Rasgon on the Resurgence of the AI Trade and Chip Sector Outlook

AI Trade Rebound

• 💡 The AI trade is back on, with investors now less concerned about a capital expenditure (capex) peak this year or next.
• 🚀 Initial fears following the "DeepSeek moment" that AI spending would decrease have been replaced by increased purchase intentions and capex intentions.
• 📈 Demand from the Middle East and other regions, coupled with easing supply issues for Nvidia's Blackwell platform, has fueled renewed confidence.

Nvidia and Broadcom Performance

• ⚡ Nvidia's Blackwell supply is improving, leading to positive outlooks for the company.
• 📊 Broadcom has materially increased its AI trajectory expectations for the coming year, reinforcing the belief that current spending trends have sustainability.
• 📉 The strong performance in AI has also positively impacted other chip names by association.

Export Restrictions and Tariffs

• ⚠️ Export restrictions to China for AI parts are already in effect, with Nvidia and AMD unable to ship these components.
• ⚖️ While some workarounds may exist for China, the broader issue of tariffs, including potential semiconductor tariffs, remains a concern that has been tabled for now.
• 📈 Despite potential tariffs and increased semiconductor costs (ASPs are 50% higher pre-COVID), demand has remained strong due to strategic imperatives for capability building.

Analog and Other Chip Sectors

• 📉 The analog space, particularly industrial and auto sectors, has been experiencing cyclical bottoms after prolonged revenue declines.
• ⚠️ However, concerns about pull-forward demand due to tariffs and overshipping in areas like consumer electronics (PCs) introduce uncertainty about the sustainability of a rebound.
• ❓ While near-term estimates for analog sectors might increase, the long-term sustainability of this rebound remains an open question for investors.