re: Intermediate term investors may play for another up move sandwiched between the end of the bear and evidence of the end of the cycle.
I assume that your "intermediate-term investors" is what I call "cycle investors", who are trying to time the peaks and troughs of the semi-equip cycle, and are not really LTB&Hers.
I am not as sure as you are, that the cycle isn't over. The chart is telling me it is. The warnings by back-end companies, and the warnings from the PC and cellphone industries, tell me it is. But overall, the level of demand in the economy is great, and chips seem to be in everything everyone is buying, and that pattern looks likely to continue. So, I don't know.
I can construct very reasonable scenarios for AMAT to be at 15 or 150, 12 months from now.
The bad one: The economy has a hard landing in 2001. Debt levels, for individuals and corporations, begin to really worry the banks, and they tighten up on credit standards a lot. Everyone buys fewer PCs, cellphones, cars, toys, etc. Since all those things have chips in them, chip demand doesn't grow as fast as expected. Beginning in Spring 2001, almost every chip sector has excess inventory and falling margins. AMAT at 35. By summer 2001, all the chip companies are saying, "lets put all our capacity increases, and 300mm, on hold." AMAT at 30. A wave of order cancellations hits the semi-equips in Fall 2001. AMAT at 25. Then, an external shock (oil embargo, for instance, by the Arabs, to force Israel to give the Holy Sites in Jerusalem to the Palestinians) causes a market panic. A wave of margin calls drives AMAT to 15, briefly, in October 2001.
The good one: We get a soft landing in 2001, helped by a couple of Fed rate-lowerings just after Bush is elected. Consumers keep consuming, debt levels aren't a problem since everyone is employed. The warnings by all the PC companies in late 2000 turn out to be one-quarter events only. Bookings for semi-equip stabilizes, at a high level, somewhat below the 2000 peaks. Semi companies have learned to anticipate demand better, and avoid over/under-capacity. In any case, chips are in so many different things now, that a decline in one sector in compensated by increases elsewhere. When the Street realizes this, the stocks take off, climbing steadily to 150 by October 2001. |
