Luca - Cryptic Trades
Markets Researcher at Cryptic Trades
Semiconductors have not topped yet, and AI chipmakers likely have one final leg higher before a broader distribution phase. The Cryptic Cycle Top Indicator, built on revenue, earnings, market structure, volume, the VIX, credit spreads, the dollar and yields, is cooling even as prices make higher highs. On AMD, every red-zone reading over the past two years marked a durable top. Once that leg plays out, buyers drawn by low forward P/Es risk a value trap at the top. x.comÂ
Micron and the wider semiconductor group were pushed down by orchestrated market manipulation that has now run its course. Citadel called for rate hikes that were never coming, Citadel and other market makers shorted semis for weeks, and they then bought the semis and AI names in Leopold Aschenbrenner's fund portfolio at the bottom before letting go of their shorts. x.comÂ
Semiconductors could stay undersupplied for a long time as more capable AI per dollar creates more uses and drives compute demand. Micron and NVIDIA trade at low forward P/Es because investors fear peak cyclical earnings, yet current earnings show no slowdown. Shortages may worsen as AI adoption spreads, though the industry could remain cyclical; a reversal of the forced rollover trade is hoped for, not assured. x.com x.com x.comÂ
Semiconductors could capture scarce spot compute's value if its forward curve holds. Compute trades in deep contango, while chip stocks price in little of that value; near-term moves are unpredictable. That makes the sector very bullish. The earlier lab-funding risk looks less acute: Anthropic should hold nearly $200B cash after its IPO and is operating-cash-flow profitable. Even with 2029 capex cuts, chips look cheap if future buyers do not default. x.com x.com x.com x.com x.comÂ
Semiconductors' parabolic run is likely to end in a bear market, and record ETF inflows may be a contrarian warning. The sector's forward P/E was 12.8 at its 2022 low and 11.5 at its 2018 low, versus the 16.4 cited now in the quoted post. Past parabolic runs saw 43%-55% drawdowns; the previous record inflow came at a top. x.com x.com x.comÂ
Semiconductors look relatively cheap against the S&P 500, while their earnings are growing much faster, barring an EPS reset. The selloff looks overdone, though that does not mean it reverses tomorrow. x.comÂ
Semiconductor earnings have outpaced prices, making the selloff look more like forced positioning than a broken growth case. Since January 2025, the SOX rose about 114% while reconstructed forward earnings rose about 198%; the estimate is approximate. Hedge funds sold global tech at a greater-than-three-standard-deviation pace in October 5-16, a pattern seen near earlier lows, though another sharp flush could come before a reversal. x.comÂ
Semiconductor trade faces a capex growth ceiling even if AI delivers what bulls expect. Spending cannot compound at 70-100% a year indefinitely, and compute per dollar roughly doubles every two years, so the same budget buys more capacity later. Today's chip valuations also demand years of 20% AI earnings growth beyond 2028: roughly 10.9 extra years for AMD, 8.9 for ASML, 7 for Marvell and 6.4 for TSMC, versus 1.6 for Broadcom and 0.8 for Nvidia; Micron needs none under the chart's assumptions. … Show more
Semiconductor stocks have not priced in a record wave of AI chip demand. Taiwan chip exports jumped over 20% in a single month and demand is 30% above three months earlier, the biggest in history, while Korea is also seeing record semiconductor demand, up 30% on mid-2026. A step change in demand comes while semis are still cheaper than before the AI boom. x.com x.com x.com x.comÂ
Some semiconductor stocks have returned to reasonable valuations as fundamentals improve, making recent declines buying opportunities. Many had traded at two to three times their median valuations; the correction brought some back toward normal, while sustained AI spending should benefit suppliers for years. x.comÂ
Semiconductors still look likely to lag on a risk-adjusted basis, even if Treasury intervention such as yield-curve control changes the broader picture. They should have been rallying hard this week and are not acting right for bulls, suggesting something is brewing, probably a capex disappointment. Hyperscalers may be closer to another leg up. x.com x.com x.comÂ
SpaceX's beat has relit the AI trade and given semiconductors a fresh catalyst. Chips led Wednesday's close, with AMD, Nvidia, Micron, Marvell and Broadcom all up, but SMH is still below its 21-day average near 594. It needs to hold 536 and reclaim 562 before buyers regain control; 594 is the next test. x.com x.comÂ
