Vi e w p o i n t | 14 Dec 2025 20:16:04 ET │ 12 pages Asia Economics Exports Chartbook: AI Capex Boom Outweigh Tariff Fears CITI'S TAKE Recent Asian trade data has been strong, showing minimal "payback effect". Asia's export strength stems from the US-led AI capex boom— rather than generically downplaying the impact of tariffs. Electronics exports are outperforming, reflecting robust growth in Taiwan, South Korea, and Vietnam. ASEAN economies like Vietnam and Thailand are importing more intermediate goods, ...

Core Insights - Nvidia has estimated that it could lose $8 billion in revenue per quarter due to restrictions on its chip sales to China, even for a scaled-down version of its products [1] Group 1 - Nvidia's revenue loss from China is projected at $8 billion per quarter [1]

Market Overview - Inflation is beginning to rise, influencing upcoming Federal Reserve actions [2] - Corporate earnings are projected to increase by 5% to 9%, potentially pushing the S&P 500 to the 7400 range by Q1 2026 [3] - Positive market sentiment is noted, although some signs of losing momentum are present [4] Company Analysis: Alphabet - Alphabet is highlighted as a strong investment opportunity, particularly in the chip sector, where competition with Nvidia is expected to drive innovation [5][6] - Projected growth for Alphabet is estimated at 12% to 14%, which is considered conservative [7] - The stock is currently trading at approximately $316.25, with an 80% increase over the last six months [15] Company Analysis: Critical Metals - Critical Metals has faced a decline of nearly 12% over the past month, attributed to geopolitical factors, particularly the US-China trade relationship [16][17] - The stock is viewed as undervalued, with potential for a 10% increase over the next 18 months [18] - The company is seen as a necessary supplier in the rare metals sector, which is critical for US needs [17] Company Analysis: SoFi - SoFi is identified as an undervalued stock within the financial sector, with expectations of a 10% to 14% increase over the next 18 months [27] - The stock has been under pressure due to a recent $1.5 billion stock offering, but it is viewed as a turnaround opportunity [26][28] - Year-to-date, SoFi has increased by 76%, indicating potential for further growth as the financial sector begins to recover [36]

Core Insights - Broadcom Inc. has consistently beaten earnings estimates, particularly in the last two quarters, with an average surprise of 1.22% [1][2] - The company reported earnings of $1.69 per share against a consensus estimate of $1.66 per share, resulting in a surprise of 1.81% for the last quarter [2] - Broadcom's positive Earnings ESP of +0.78% indicates bullish sentiment among analysts regarding the company's earnings prospects [8] Earnings Performance - In the previous quarter, Broadcom was expected to earn $1.57 per share but reported $1.58 per share, achieving a surprise of 0.64% [2] - The combination of a positive Earnings ESP and a Zacks Rank of 3 (Hold) suggests a high likelihood of another earnings beat in the upcoming report [5][8] Analyst Sentiment - Estimates for Broadcom have been trending higher, reflecting the company's strong earnings surprise history [5] - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 or better have a nearly 70% chance of producing a positive surprise [6] Upcoming Earnings - Broadcom's next earnings report is expected to be released on December 11, 2025 [8]

Core Viewpoint - Semtech (SMTC) is anticipated to report a year-over-year increase in earnings driven by higher revenues, with the actual results having a significant impact on its near-term stock price [1][2]. Earnings Expectations - The earnings report is scheduled for release on November 24, and better-than-expected key numbers could lead to a stock price increase, while a miss could result in a decline [2]. - The Zacks Consensus Estimate predicts quarterly earnings of $0.44 per share, reflecting a year-over-year increase of +69.2%, with revenues expected to reach $266.65 million, up 12.6% from the previous year [3]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating that analysts have not significantly altered their initial estimates during this period [4]. - The Most Accurate Estimate for Semtech is higher than the Zacks Consensus Estimate, resulting in an Earnings ESP of +1.29%, suggesting a bullish outlook from analysts [11]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that a positive Earnings ESP reading is a strong predictor of an earnings beat, especially when combined with a Zacks Rank of 1 (Strong Buy), 2 (Buy), or 3 (Hold) [9]. - Semtech currently holds a Zacks Rank of 2, enhancing the likelihood of beating the consensus EPS estimate [11]. Historical Performance - In the last reported quarter, Semtech was expected to post earnings of $0.40 per share but delivered $0.41, resulting in a surprise of +2.50% [12]. - Over the past four quarters, Semtech has beaten consensus EPS estimates three times [13]. Conclusion - Semtech is viewed as a compelling candidate for an earnings beat, but investors should consider other factors that may influence stock performance beyond just earnings results [16].

Core Insights - A significant increase in demand for gold has been observed since the beginning of August, leading to a surge in gold equities [1] - The performance of gold equities has surpassed that of chip stocks, which are benefiting from the artificial intelligence boom [1] Group 1 - The fresh rush into gold has been a key driver for the demand in gold equities [1] - Gold equities have shown gains that outpace those of chip stocks [1]

Core Viewpoint - Concerns are rising on Wall Street regarding the potential overheating of the artificial intelligence (AI) trade, with warnings that the current boom may resemble a bubble [1][2] Group 1: Market Sentiment and Risk Indicators - JPMorgan CEO Jamie Dimon highlighted elevated asset prices as a significant concern, indicating that when prices are high, there is a greater risk of decline [1] - The Bank of America's Global Fund Manager Survey identified an "AI equity bubble" as the top global tail risk for the first time, reflecting extreme investor exuberance [2] - Cash levels among fund managers have dropped to 3.8%, nearing the "sell" threshold of 3.7%, which historically signals peak risk appetite [3] Group 2: Institutional Investor Behavior - State Street's Risk Appetite Index shows that large institutional investors have been increasingly bullish, adding to riskier assets for five consecutive months [4] - Nicholas Colas from DataTrek Research noted that absent a significant shock, these investors are unlikely to alter their optimistic views soon [4] Group 3: Sector Correlations and Investment Trends - Correlations across sectors have reached their lowest levels since the current bull market began, a sign that investor confidence may be excessively high and could precede short-term pullbacks [5] - Companies are responding to investor confidence by significantly increasing their investments in AI, with Google announcing a $15 billion investment in India for a new data center hub [6] - Walmart has partnered with OpenAI to enhance AI-powered retail tools, while OpenAI has secured multiple chip and infrastructure deals, which some analysts believe could exacerbate bubble risks [7]

Market Performance - The S&P 500 and Nasdaq are tracking small weekly gains of 0.3% and 1.1% respectively, while the Dow is pacing for a 0.9% weekly decline [1] - Nvidia's shares are up 2.6% this week following positive comments from CEO Jensen Huang regarding increased computing demand, which has reignited enthusiasm in the AI sector [1] Economic Outlook - The U.S. government shutdown has entered its tenth day, causing delays in key economic data releases, including September's inflation figures [2] - The University of Michigan's consumer sentiment index, set for release, may gain significance due to the absence of government data, with potential implications for the economy if the shutdown continues [3] Earnings Season - Corporate earnings will be in focus next week, with major banks like JPMorgan Chase and Citigroup set to report third-quarter results, which may provide insights into credit quality and consumer health [4] Federal Reserve Commentary - Fed Governor Christopher Waller indicated that there is still room for additional rate cuts, but emphasized the need for caution, reflecting the balance between softening growth and persistent inflation concerns [5] Market Forecast - Traders may experience choppy market action into early next week due to limited economic data, but improving earnings visibility and expectations for further Fed easing could sustain a bullish trend once the government impasse is resolved [6]

Core Insights - AMD secured a significant multiyear chip deal with OpenAI, enhancing its market position and potential revenue streams [1] - OpenAI was granted a warrant to purchase up to 160 million shares of AMD, indicating strong confidence in AMD's future performance [1] Company Summary - The multiyear chip deal with OpenAI represents a strategic partnership that could lead to increased demand for AMD's products [1] - The warrant for 160 million shares suggests a potential increase in AMD's stock value and investor interest [1] Industry Implications - This partnership may position AMD favorably within the competitive landscape of AI and semiconductor industries, potentially attracting more collaborations [1] - The deal could signal a growing trend of tech companies investing in advanced chip technologies to support AI developments [1]

Core Insights - Tower Semiconductor Ltd. reported strong financial results for Q2 2025, leading to a significant rise in share price, which has increased by 45% in less than a month, reaching a market cap of $7.566 billion [1][2]. Company Performance - The share price surged to $67.65, which is 27% above the price at which Intel was supposed to acquire Tower for $5.4 billion [3]. - Following the cancellation of the Intel deal, Tower's share price had previously dropped to $22 but has since rebounded significantly [3]. Market Sentiment - Positive sentiment towards the chip market has contributed to the stock's rise, with investors seeking exposure to AI through undervalued companies like Tower [4]. - Tower is currently trading at an EBITDA multiple of close to 10, making it one of the cheapest stocks in the chip industry compared to others trading at multiples of 20 or 30 [4]. Strategic Positioning - Tower is positioning itself as a key manufacturer for next-generation high-performance communications, particularly in the expanding data center and AI markets, with AI activities approaching 30% of its sales mix [5]. - The company is also involved in optical communications and RF fields related to the mobile market, showing signs of recovery after several challenging years [5]. Analyst Recommendations - Oppenheimer has an "outperform" rating for Tower shares with a price target raised to $70, reflecting confidence in the company's growth potential [6]. - Benchmark has also raised its price target from $66 to $73, maintaining a "Buy" recommendation after a positive meeting with Tower's management [7]. - All five analysts covering Tower have a positive outlook, with an average price target exceeding $70 [7]. Historical Context - Tower's current situation is a significant turnaround from 20 years ago when it was heavily in debt, with CEO Russell Ellwanger playing a crucial role in the company's recovery [8]. - The cancellation of the Intel deal resulted in a compensation of $353 million to Tower, which may have ultimately benefited the company by allowing it to focus on its core business [8][9].