Technology
JNK's research shows GOOG's direct TSM capacity reservations signal a shift away from expensive third-party AVGO design partnerships. The company is now booking advanced packaging without immediate orders, positioning for late 2026 TPU production deployments. TPU 7e progresses with MTK handling I/O integration on roughly 2M unit volumes, while TPU 8p selection between AVGO and AIchip reflects growing design house pricing pressure. This mirrors AWS's trajectory - from external partnerships towards full internal design control. Near-term, Alchip and MTK benefit from current programmes. Longer-term, AVGO faces structural headwinds as hyperscalers internalise capabilities. Click here to access the full note.
US: Risk on
High yield spreads are at 17-year narrows. The major indexes across the market cap spectrum remain in uptrends. Interest rate volatility (MOVE index) continues to stabilise and move lower. Semiconductors (SMH, NVDA, TSM, AVGO) are re-emerging as leadership. Consumer Discretionary (XLY), Communications (XLC), Technology (XLK), Services, and many other high-growth risk-on areas (ARKK, ARKQ, ARKF, ARKW, BITQ, WGMI, IPO, etc., all of which the Vermilion team remain bullish on) are near new RS highs, while defensives including Staples (XLP), Health Care (XLV), Utilities (XLU), and Real Estate (XLRE) are all underperforming and near 6+ month RS lows. Discretionary vs. Staples ratios (XLY vs. XLP, RSPD vs. RSPS) continue to move up and to the right. Bitcoin remains bullish and is at all-time highs. This is all in spite of the December pullback, and is consistent with an equity bull market.
Technology
Unless there is fall-off in end demand, shortages of IC from lagging nodes can be expected to be with us for up to 3-4 quarters, which seems quite disconcerting. End demand may in fact be already falling off in TVs, PCs and perhaps even smartphones in some geos. If so, IC shortages could ease up even before the addition of wafer capacity. The bad news – falling end demand drives down TSM’s Cy22 revenue. PT NT$600 (5% upside)
