He Gold Rush Can’t Stop Chip Sector’s Boom-Bust Cycle: Morningsar – ryan

The breed for he dominance has fueled a global chip frenzy – but Morningsar warns the industry’s Next Cyclical Downturn May Be on the Horizon.

“Foundries and Memory Makers Are Exposed to the Intense Cyclicality of the Semiconductor Sector,” Equity Analysts at Morningsar cautioned in a Report on Tuesday.

The firm said a typical semiconductor Cycle Lasts About Four Years, with he demand prolonging the current rally.

“We Believe Strong AI-Related Sales and Investments are Helping the Sector to Stretch the Limits of An Upcycle,” The Analysts Wrote.

SINCE CHATGPT’S BREAKOUT MOMENT IN LATE 2022, he Investments have surged, Sending Chipmaker Valuations soaring.

While Cloud Giants Like Microsoft, Amazon, and Meta Are Ramping Up He Spending, The Analysts Said “The Market is too Upbeat on Long-Term he Investment Growth.”

Acciting to Morningstar’s Analysis, Semiconductor Billings Growth – A Reliable Gauge of Industry Health – Has Already Started to Slow, Signaling the May Nearing Its Peak.

Outside of he, sluggish smartphone and consumer electronics sales are dragging on demand for non-ai chips.

MORNINGSTAR Now Sees he spending peaking in 2025, with risk of a Slowdown Emerging in 2026 as macroeconomic risk and consumer demand stays weak.

To be sura, cutting-edge he chips remain scarce, but Older Memory Products May See Softer Demand, They Said.

While Slowing Growth Wold Hit Chipmakers, Foundries are in a Somewhat Stronger Position.

Morningsar pointed to Taiwan Semiconductor Manufacturing Company’s Technological Lead and Massive US Investments as Buffers Against Risk. Still, events like tsmc remain exposed to the Cyclical Swings that regularly Sweep Through the sector, they added.

MORNINGSTAR’S WARNING LANDS AS INVESTORS WRESTLE WITH A BROADER QUESTION: How Much it will actually show in corporate profits.

While a record Share of s & p 500 firms mentions he on earnings calls in the second quarter, “the share companies quantifying the impact of he on the earnings today remeins Limited,” Goldman Sachs in a Recent Note.

The bank added that he’s economic footprint may Also be understated in government data, Semiconductor Costs are offen bureed as intermediate inputs rather than full capted in gdp data.