[Good Morning Stock Market] Micron Soars Over 7%... Semiconductor Stocks Gaining Momentum?

Nasdaq Up 1.79%·S&P 500 Up 1.42%
Micron Surge Boosts Expectations for Samsung Electronics and Others

The U.S. stock market closed higher as semiconductor companies showed strong performance and expectations grew for the end of interest rate hikes. The Nasdaq and S&P 500 indices rose 1.79% and 1.42%, respectively, while the Dow Jones Industrial Average also increased by 1%. Influenced by this, the domestic stock market is expected to show an upward trend on the 30th.

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Sangyoung Seo, Researcher at Mirae Asset Securities: “Focus on Semiconductor-Centered Supply and Demand Improvement”

The most notable aspect of the U.S. stock market yesterday was Micron’s rise of over 7%, which led the Philadelphia Semiconductor Index to increase by 3.27%. Although Micron’s previous quarter earnings and next quarter earnings forecasts fell short of market expectations, the improvement in inventory levels acted as a positive factor. Sales to data centers, the largest demand source, are expected to hit bottom in the second quarter. In particular, the company expressed confidence that inventory levels will reach appropriate levels by the end of this year due to a significant increase in demand related to the artificial intelligence (AI) industry.

On the same day, Intel (7.61%), Microchip Technology (3.87%), ON Semiconductor (4.36%), AMAT (2.96%), Lam Research (6.32%), ASML (3.03%), and TSMC (2.15%) also showed strong performance. For Intel, the announcement that it will deliver the Sierra Forest semiconductor chip, focused on power efficiency for data center customers, in the first half of next year acted as a positive factor.

As banking risks subsided, the U.S. stock market showed even stronger performance. The Swiss government’s approval of financial support for UBS, which acquired Credit Suisse (CS), alleviated concerns about bank stocks. Additionally, Federal Reserve (Fed) Vice Chair Michael Barr’s comment that the Silicon Valley Bank incident was an issue specific to individual companies helped stabilize anxiety about the banking system.

Considering this, the domestic stock market is expected to continue its strength centered on semiconductors. Although domestic semiconductor companies showed weakness yesterday due to the sharp decline in Micron’s earnings, the rise of the Philadelphia Semiconductor Index in the U.S. market and the easing of banking risks are expected to improve investment sentiment toward risk assets.

Jiyoung Han, Researcher at Kiwoom Securities: “Rotation of Growth Themes such as Semiconductors and Platforms Until the Earnings Season Fully Begins”

Currently, the domestic stock market is showing progress centered on major growth themes amid a sluggish earnings momentum environment. With strong downward pressure on earnings forecasts and the full-scale start of the first-quarter earnings season yet to begin, there is a high possibility of rotation mainly among major growth themes (semiconductors, platforms, internet, games) rather than a trend reversal.

In particular, expectations for the semiconductor sector to have passed its bottom are rising. This is because there are factors that could drive up stock prices, such as lowered earnings expectations for Samsung Electronics, the country’s leading semiconductor company, a market capitalization weight returning to 2018 levels, and expectations of production cuts. During the first-quarter earnings season, it is worth considering expanding the semiconductor sector weighting after Samsung Electronics’ earnings announcement.

It is also advisable to pay attention to the tech sector, which is proactively reducing its workforce. Compared to other sectors, it is expected to show freedom from cost burdens and increase its attractiveness. It is analyzed that it will attract attention due to cost reduction defending operating profit margins, a decrease in discount rates due to falling interest rates, sufficient cash holdings, and strong pricing power.

However, there are points to be cautious about even when buying growth stocks. What was confirmed by the liquidity crisis in the banking sector, including Silicon Valley Bank (SVB), is that the market reacts sensitively to interest rates. It is necessary to observe the Fed’s stance on how long it will maintain high interest rate levels and how interest rate changes will appear. Furthermore, although the stability issues of global financial institutions have slightly eased, market caution continues, so it is important to focus on companies with cash stability and limited debt burden in preparation for further uncertainty expansion.