UBS and Barclays maintained bullish stances on the artificial intelligence investment cycle on May 19 (local time), despite semiconductor stocks experiencing a nearly 10% weekly decline, according to CNBC. UBS cited persistent AI-driven computing demand exceeding supply capacity and forecast 92% earnings growth this year for Philadelphia Semiconductor Index constituents, while Barclays characterized recent selling as position adjustment rather than sector exodus. The Philadelphia Semiconductor Index recorded its worst weekly performance since the first week of April last year, when it fell 16.04% following former President Donald Trump's reciprocal tariff announcement, amid overlapping concerns over Middle East geopolitical risks, rising oil prices, and prolonged Federal Reserve tightening.
UBS Forecasts 92% Earnings Growth for Semiconductor Index Constituents
UBS issued a report emphasizing profit growth momentum among semiconductor companies and asserting that the sector retains sufficient upside potential to support broader market gains. Ulrike Hoffmann-Burkhardt, UBS Global Equities Head, stated that AI proliferation drives computing demand continuously above supply capacity, with supply chain production constraints unlikely to resolve in the short term. She projected that Philadelphia Semiconductor Index constituent companies will achieve 92% year-over-year earnings growth this year and an additional 40% growth next year. Hoffmann-Burkhardt added that the semiconductor industry will continue underpinning broad-based stock market rallies going forward.
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Semiconductor manufacturing process [Yonhap News]
Barclays Identifies Position Adjustment in Recent Semiconductor Selling
Barclays diagnosed that despite the sharp semiconductor stock decline, no panic selling pattern has emerged. The firm reported a significant increase in investor inquiries regarding semiconductor sector rebound timing, stating that current selling represents position adjustments reducing holdings rather than aggressive exits from the sector. Barclays characterized the selling as measured portfolio rebalancing rather than wholesale abandonment of semiconductor exposure.
JP Morgan Reports 119% Year-Over-Year Growth in May Semiconductor Sales
Semiconductor demand maintained robust momentum according to market data. JP Morgan cited World Semiconductor Trade Statistics (WSTS) figures on May 17, reporting that global semiconductor sales grew 106% year-over-year in April, with the growth rate expanding to 119% in May. WSTS previously forecast that the global semiconductor market will grow 90% this year and achieve an additional 27% growth next year.
Deutsche Bank Urges Caution on Semiconductor Valuations
Contrasting views emerged from some Wall Street analysts emphasizing the need for cautious approaches given elevated semiconductor stock valuations. Maximilian Uller, Deutsche Bank strategist, stated in a recent report that investors must consider portfolio weight adjustments given the uncertain macroeconomic environment and the semiconductor sector's recent role in driving market gains. Uller diagnosed that the current juncture requires deliberation on how to rebalance semiconductor holdings within portfolios.
FAQ
What caused the Philadelphia Semiconductor Index to fall nearly 10% last week?
The Philadelphia Semiconductor Index experienced concentrated profit-taking as Middle East geopolitical risks expanded, oil prices rose, and concerns over prolonged Federal Reserve tightening overlapped. The nearly 10% weekly decline represented the index's worst weekly performance since the first week of April last year, when it fell 16.04% following former President Donald Trump's reciprocal tariff announcement.
What earnings growth did UBS forecast for Philadelphia Semiconductor Index companies?
UBS Global Equities Head Ulrike Hoffmann-Burkhardt projected that Philadelphia Semiconductor Index constituent companies will achieve 92% year-over-year earnings growth this year and an additional 40% growth next year. She attributed the forecast to AI-driven computing demand continuously exceeding supply capacity and supply chain production constraints unlikely to resolve in the short term.
How did global semiconductor sales perform in April and May according to WSTS data?
JP Morgan cited World Semiconductor Trade Statistics figures on May 17, reporting that global semiconductor sales grew 106% year-over-year in April, with the growth rate expanding to 119% in May. WSTS previously forecast 90% market growth this year and an additional 27% growth next year.
