Achi news desk-
The semiconductor sector is correcting as expectations of interest rate cuts diminish, prompting concerns about the impact on these technology-driven high-growth stocks. Wedbush Enterprise Hardware Analyst Matt Bryson joins Yahoo Finance to discuss the dynamics shaping the chip industry.
Bryson acknowledges that the rise of productive AI has been a significant driver behind the recent success of chip stocks. While he believes AI is changing “the way technology works,” he notes it will take time. Because of this, Bryson points to the fact that “significant investment” will continue to occur in the chip market, driven by the growth of productive AI applications.
However, Bryson warns that as interest rates remain high, it “could weigh on consumer spending.” However, he expresses confidence that the AI ​​revolution “changing the landscape for technology” will likely insulate the sector from the impact of high interest rates, as investors are not willing to miss out on the innovative “next technology”.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance.
This post was written by Angel Smith
Video Transcript
BRAD SMITH: As bets cut rates of change, so do movements in one sector, in particular. Shares of AMD and Intel, both down over 15% in the last 30 days. The Philadelphia Semiconductor Index, also known as the Sox, is down over 10% from recent highs, despite a higher rate environment.
Our next guest is still bullish on the sector. Matt Bryson, Wedbush Enterprise Hardware analyst, joins us now. Matt, thank you so much for taking the time here. Walk us through your thesis here, especially given some of the retraction we’ve seen recently.
MATT Bryson: So I think what we’ve seen over the last year is that the growth of productive AI has boosted the chip stocks. And the expectation that AI will shift everything in the way technology works.
And I think, in the end, that thesis will prove out. I think the question is really timing. But the investments that we have seen have raised NVIDIA, which have raised AMD, which have raised the chip stock and the sector, in general, the big cloud service providers, building data centers. I don’t think anything has changed there in the near term.
So when I talk to OEMs, who make AI servers, when I talk to cloud service providers, there’s still significant investment happening in that space. That investment is expected to continue for sure until 2025. And I think that as long as there is this significant investment, we will see chip names reporting strong numbers and leading for strong growth.
SEAN SMITH: Matt, when it comes to the fact that we’re in this macroeconomic environment right now, it’s likely that rates will be higher for longer here, at least, when you look at the expectations, especially in following some of the commentary we received. Fed officials this week, what does that show more broadly for the AI ​​trade, meaning, is there reason to be a bit more cautious in this higher rate environment for a longer period, at least, in the near term?
MATT Bryson: Yes. I think certainly from a market perspective, high interest rates pressure the market. Ultimately, they weigh on consumer spending. Certainly, for many of the chip names, they are high multiple stocks.
When you think about where there can be more of a reaction or a negative reaction to high interest rates, certainly, it has some effect on those names. But in terms of, again, AI changing the fundamental landscape for technology, I don’t think high interest rates or low interest rates will change that.
So when you think about Microsoft, Amazon, all of those big data center operators who are looking at AI, potentially changing the landscape forever and wanting to make a bet on AI to make sure that they don’t they miss that change, I don’t think whether interest rates are low or high is going to have a real impact on their investment.
I think they are going to go ahead and invest because nobody wants to be the guy who missed the next technology wave.
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