Is the US AI exchange rate transient, or is there a “two-stage rocket” rise
Take a break from the rise in the AI market
There is a sense of relief from the rise in the US AI (artificial intelligence) market, which has shown a steady upward trend since the beginning of the year. The Nasdaq Composite Index has a high ratio of high-tech stocks $Nasdaq(NDAQ.US$While price increases close to 40% have been shown at one point since the beginning of the year, the development of shortness of breath was conspicuous when it completely turned around in August. Although the Philadelphia Semiconductor Stock Index (SOX), which consists of semiconductor-related stocks that drive the AI market, also approached a record high (January 22), it temporarily showed a decline of 10% or more in August. In response to the spread of AI-related stock investment, the US stock market has shown unexpected excitement this year, but in addition to the US policy interest rate (5.25% to 5.5%) being at a high level for the first time in 22 years, currently, US long-term interest rates have temporarily risen to 4.28%, to a high level for the first time in about 10 months, against the backdrop that US long-term interest rates have risen to a high level for the first time in about 10 months $Apple(AAPL.US$Ya $Microsoft(MSFT.US$With major US tech companies at the top, they were pushed by profit-setting sales across the board.
In addition to the decline in EPS associated with full-scale interest rate hikes by the US Fed in 2022, US IT-related stocks were plagued by the double pain of a reduction in PER due to QT (fund absorption). Looking at the gain/fall rate of the major US indices in '22, the Dow average fell 10%, while the NASDAQ, which has a high PER level, showed a 30% drop in price. Under such circumstances, the pessimism surrounding the IT sector changed as OpenAI released the artificial intelligence chatbot “ChatGPT” in 2022/11. In the “AI enterprise performance” (2022/6 to 2023/6, 2022/6 is 100) compiled by factset, the correlation between the weighted average index (AI index) of 154 AI supplier companies and the global market benchmark index (global index) is shown. With the release of ChatGPT, the AI index began to rise, and in late March this year, it showed performance that surpassed the global index. Furthermore, starting with the announcement of financial results for NVIDIA (NVDA) 1Q, the AI index developed aiming for one level higher, and until the end of June this year, the annual price increase rate of the AI index reached 36.01%, which greatly exceeded 14.14% of the global index. It seems no exaggeration to say that ChatGPT and NVIDIA are two sides of the AI market.
There is a big gap between stock prices and performance in the US IT sector
It seems that the IT sector's quarterly performance did not perform well in comparison to the strong performance of the US IT sector. According to the factset summary (as of 8/4) $Apple(AAPL.US$、 $Microsoft(MSFT.US$、 $Intel(INTC.US$While the financial results for the April-6 fiscal year of major US tech companies have generally exceeded market expectations, the IT sector's EPS forecast for the April-6 fiscal year has only picked up slightly since the end of June (same ▲ 3.5%), with a 1.1% increase from the same period last year. According to the full-year forecast for 2023, the IT sector's EPS is expected to increase 1.3% from the previous year, and there was only a slight improvement from the end of June (0.9% increase in profit from the same period). Also, looking at PER valuation, based on the fact that the IT sector's predicted PER for the next 12 months is 27.0 times, which is 22.5 times the most recent 5 year average and 19.4 times the most recent 10 year average, it seems essential to achieve a significant increase in profit that supports the AI exchange rate in order to achieve a “two-stage rocket” rise.
NVIDIA stands out
Under such circumstances, market expectations for NVIDIA, which is about to announce financial results for the 2023/2Q (fiscal year ending May to July) on the 23rd of this month, are high. It is fresh in my memory that 1Q sales of the company's data center (DC) division greatly exceeded market expectations, with a 14% increase (4.284 billion dollars) from the same period last year. The market forecast for the DC division's 2Q sales is 7.779 billion dollars, an increase of about 2 times from the same period last year, indicating that it will break through 5 billion dollars for the first time. As is proportional to the strength of the company's DC division, cloud and data center investments for AI development are rapidly increasing in financial results for the April-6 fiscal year by major companies. In the market, views have also emerged that the ratio of AI investment to IT budgets of companies that were less than 1% in '23 will expand to 8-10% in '24. Currently, while there are market participants who accept the AI exchange rate as transient, there is also a tendency to view the current adjustment phase as an opportunity for aggressive buying. As NVIDIA's 2Q financial results are the first test, it seems that the true value of the AI market will first be questioned.
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