May. 12 at 7:33 PM
Bernstein 5-star analyst (74 out of 12,243 Wall Street Analysts) beleive AI chip rally has further to run b/c it has been driven almost entirely by earnings growth rather than multiple expansion
"While SOX blended NTM earnings ests are up +69% since the start of the year, the SOX P/FE multiple is actually down slightly (~2%)," adding that "earnings growth has accounted for more than 100% of the sector move YTD"
This is not a castle in the air built on multiple expansion, but a fundamentals-driven market backed by solid performance. While the market debates whether valuations are "high or low," institutional investors are already zeroing in on "earnings sustainability" and "valuation convergence for core stocks."
Within the sector, he flagged a growing divergence that he sees as an opportunity: GPU & ASIC names, alongside semiconductor capital equipment stocks, have seen relatively muted multiple expansion despite strong earnings growth, suggesting room for catch-up.
By contrast, analog & CPU names have seen more aggressive multiple re-rating relative to their earnings increases.
Memory stocks have been the most extreme, w/ avg share prices more than tripling YTD on an earnings outlook that has nearly quintupled, even as multiples have declined on peak cycle concerns.
Berstein remians Bullish on
$NVDA $AVGO $AMAT $KLAC $LRCX