Betty,
re: Of course, chip stocks might have already discounted this idea, and why should we listen to analysts anyway? Why weren't they telling us to sell chip stocks several months ago instead of now when they've already dropped into the basement?
If you were talking about the interview with Dan Niles, I saw it also. Semiconductors have always been (and will probably always be) cyclical. Part of the problem is lead time for production facilities, it takes about two years to build a new Fab. So the companies have to project demand two years out based on current demand, when demand is strong you can bet they will over-commit to capacity and there will be a glut of product, lower prices, and lower gross margins for manufacturers. Then nobody can afford to build capacity, demand catches up, and you have the under-capacity situation we had from mid-99 to mid-00.
As far as the analysts, SSB's J. Joseph called the top in the semi cycle last summer, and was roundly criticized on these threads (by me and many others) and by other analysts. At the time, everybody was talking about 4th quarter shortages, so the call was gutsy and prescient. Most analysts, however, turn the most negative when the demand curve is flattening at the bottom, we are probably close to that point right now. And that has proved to be the time to buy semiconductors, even if you have some loss in the prices before the eventual turn.
Here is a chart of the semiconductor index. Note the similarity of the current downturn to the ones in 95-96 and 97-98.
stockcharts.com[h,a]maclyymy[pb50!b200][vc60][iUp14,3,3!La12,26,9]
(I'm not an expert on the semiconductor stuff, for a better perspective on the cycles hang out on the AMAT thread for a while.)
John |
