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Technology Stocks : Semi Equipment-Sell when they're singing in the streets
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To: Zeev Hed who wrote (122)5/26/2000 9:41:00 PM
From: Ian@SI  Read Replies (2) of 276
 
Zeev,

A couple factors to temper your usual optimism. :-)

1. Many chip makers built fab shells and never filled them with equipment. Those shells are now being populated.
Thus a higher than historical percentage of capital budgets are going directly to equipment makers.

2. The DRAM makers hadn't started building in full force earlier this year. That group is now in the process of joining into this upcycle. While a pause isn't yet apparent in the other sectors, the DRAM guys will certainly fill any gap they might leave.

3. Capacity shortfalls will temper the expected 30% average annual chip price reduction - which never is 30%. We had a few years where it was closer to 90% for memory; I suspect we're in for a couple years where it will be less than the 30% average.

4. As BK has posted on several threads, the current view for chip sales is about 320B annually within a couple years. And I haven't seen any Luddites predicting a return to hammers and chisels any time soon, though that make Greenspan happy.

I suspect that the Fed is finished with interest rate hikes. I believe they had overshot before the last 50 bp hike. There's a better probability that the bias will change toward easing than tightening IMO.

FWIW,
Ian.

P.S. Did I balance your "optimism" with my "pessimism"? :-)
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