Navitas stock surge masks growing execution crisis in AI power market
Technology
JNK Supply Chain Research reveals serious problems hiding beneath the surface as NVTS transitions chip production from TSMC to PSMC. The new factory has lower quality standards and worse yields. Critical 650V GaN devices won't reach mass production until late 2026 or early 2027. Competitor Infineon already ships 800V power solutions to AI data centres. NVTS remains in development while the market moves forward. Big customers like NVIDIA are diversifying suppliers instead of depending on NVTS. The company has few shipping products in hyperscale AI infrastructure. NVTS pioneered GaN technology with 250 million units shipped. But execution matters more than innovation when competitors deliver working products first. NVTS is one of 23 companies JNK tracks in the analog space. Click here for recent results.
Edition: 223
- 31 October, 2025
Technology
Richard Windsor argues SoftBank’s $2bn investment in INTC, alongside a potential 10% US government stake, may keep the company alive but does little to resolve its strategic paralysis. INTC faces a stark choice: either invest heavily to catch up with TSMC or break up the business - yet under new CEO Mr. Tan, neither path is clear. The board abandoned Pat Gelsinger’s catch-up strategy due to mounting costs, leaving INTC exposed to further share losses in PCs (to AMD and Qualcomm) and in data centres (to Nvidia and AMD). Richard warns that without decisive strategy, customer confidence will erode, competitors will gain share with ease and capital injections alone cannot avert decline. He sees no attractive entry point in INTC shares.
Edition: 218
- 22 August, 2025
Big Tech: Asia vs. US - Samsung spoils the chase
Technology
2024 was a banner year for mega-cap US Tech companies, with Apple, Nvidia, Microsoft, Amazon and Meta rising a collective +64%. Were it not for Samsung Electronics crashing -41%, Asia’s mega-cap Tech companies (TSMC, Tencent, Samsung, Alibaba and Meituan) would have almost matched their US peers: +61% collective return (USD) without Samsung but +40% with Samsung. The good news: rolling into 2025, Crystal Shore has a positive risk rating on all 5 Asian Tech companies. Even Samsung.
Edition: 202
- 10 January, 2025
Technology
While revenue guidance was largely in line with Street expectations what caught investor attention was the "insane" margin outlook. TSMC is clearly doing a good job extracting value from Nvidia’s high margin AI business. The steady tone of management is likely to temper a surge in negative sentiment in response to ASML’s caution. There was no change to TSMC’s capex outlook, which ought to help investors return to the deeply sold-off Lam Research and Applied Materials. KC Rajkumar expects the stock to drift up, but not without volatility driven by investor concerns regarding sustainability of the AI rally and potential new restrictions on the export of AI chips. He raises his 2024 estimate to NT$2.87tn/NT$44.6 and 2025 estimate to NT$3.67tn/NT$56.7. TP NT$1250.
Edition: 197
- 18 October, 2024
Technology
Having published a deep dive on TSMC’s revenue growth outlook for 2025 in which New Street forecasts material upside to consensus estimates (nearly 30% growth without relying on beats in datacentre AI), they recently published a second instalment focused on the company's margin profile. New Street expects a beat on gross margins next year, primarily driven by higher utilisation and an easing of the headwind related to the ramp of N3, partially offset by the ramp of foreign fabs and N2. Overall, they expect gross margins to expand by 3 points to 57%. TP NT$1,375 (45% upside).
Edition: 195
- 20 September, 2024
AI: The race to the bottom
One would have expected Anthropic’s latest innovation to be part of its premium tier, but the fact it is free is a sign that the race to the bottom, kicked off by Meta, is already underway. Richard Windsor sees it as a sign that the company is struggling to attract users to its platform in an already competitive environment. There are still no signs of the promised superintelligence on the horizon. Current expectations and valuations are unrealistic, and we will likely see the reset begin in the venture capital space as start-ups fail to meet their targets and go back to their backers for more money. Against this backdrop, everyone is going to take a hit, but the least pain is likely to be felt by Nvidia and TSMC. Richard prefers adjacencies of inference at the edge and nuclear power as the best way to get exposure to AI.
Edition: 194
- 06 September, 2024
Technology
Bad news comes in threes. First, there is a new-found realisation that AI returns are not keeping up with massive AI investments. Second, there are macro-related worries. And now third, a report emerged that NVDA’s Blackwell roll-out is being delayed due to “design flaws”. KC Rajkumar is not surprised. In a recent Micron note, he pointed to the potential for heating-related failures of the NVDA GPU-HBM module. His most recent checks now show that NVDA is likely to pause GPU wafer starts at TSMC until yield-issues are resolved. KC expects a hole appearing in NVDA’s 2FH25 product roll-out and revenue ramp. Estimate cuts are on the way. He is looking for the stock to head to the $80 level into the upcoming earnings call. Advanced Micro Devices, on the other hand, could end up being an accidental winner.
Edition: 192
- 09 August, 2024
Technology
Arete raises their TP to NT$1,437 after increasing their estimates for both FY24 and FY25. Key points post Q2 results include: 1) Sales from AI processors are expected to triple this year and with AI players planning to shift to leading-edge over the next few years, Arete believes TSMC will make N2 family capacity much larger than for prior nodes. 2) Expects TSMC to raise wafer prices 3-8% for N5 and N3 customers starting 1st Jan 2025; can deliver 55%+ gross margin in FY25E. 3) Potential upside from AI PC and AI smartphones in 2025. 4) Geopolitics - outsourcing chip manufacturing to TSMC at leading-edge is clearly an economic win for US companies - a point at odds with recent Trump comments.
Edition: 191
- 26 July, 2024
Pressure is making life very hard for Chinese semiconductors
Technology
While SMIC blamed domestic competition for continued gross margin weakness, Richard Windsor suspects the real issue is to be found at the “leading edge” where it is using a multi-patterning technique to manufacture at 7nm and 5nm. Both Intel and TSMC tried to do multi-patterning for 7nm and abandoned it because the yields were so low that it was not economical to continue. China’s semiconductor industry can make products at much higher cost, but the state will need to support the industry which is becoming increasingly difficult as China’s economy limps along. Furthermore, Chinese technology will no longer be the cheaper option making Western products and standards more competitive in African, South East Asian and Latin American markets.
Edition: 186
- 17 May, 2024
Technology
TSMC is enjoying renewed investor interest after its surprisingly strong Oct monthly sales. In KC Rajkumar’s view, the consensus bull thesis for 2024 - ASP increase as the 3nm node ramps, cyclical upturn in PC / smartphone - is inadequate. KC expects upside theme to TSMC’s consensus expectations next year includes significant 5nm demand from major cloud service providers - Microsoft’s newly unveiled AI accelerator chip and Amazon’s newly unveiled Graviton-4 CPU. Relative to Nvidia, KC believes TSMC is an inexpensive vehicle to invest in the AI theme as MSFT's internal AI program makes a major effort to find an alternative to NVDA’s GPU. TP NT$750 (30% upside).
Edition: 175
- 08 December, 2023
Semis & Hardware: Real-Time Views
Technology
Arete’s monthly newsletter covers the latest updates in the global tech hardware and semis markets, with a particular emphasis on foundry, memory, compute, semi-cap, wireless semis, and EV/autos. Highlights from their Nov edition include: 1) Dramatic shift in memory - Q4 price surge signals shift from a buyers’ to a sellers’ market. 2) HBM market dynamics - is AMD diversifying its HBM supplier base with new SK Hynix deal? 3) Why Huawei looks set for a bumper 2024 and US sanctions backfire. 4) Why Apple’s spend at TSMC might be flat in 2024, curbing TSMC recovery. 5) Auto semis - content is king in 2024. 6) Lithium-ion battery outlook - all-time-high earnings amid all-time-low valuations. 7) To infinity and beyond - satellite semis growth in the 2020s.
Edition: 174
- 24 November, 2023
Technology
Preliminary results from Samsung combined with TSMC’s monthly revenue disclosure gives Richard Windsor increased confidence that the inventory correction has come to an end. Of all the component suppliers, QCOM is now trading at the bottom of its peer group in terms of PER ratio which demonstrates just how short-term the market thinks. There is no end in sight to its sales of 5G modems to Apple, it is winning enough deals in automotive to seriously disturb Mobileye and it is very well positioned for the Metaverse when or if it takes off. From a long-term valuation perspective, the shares are on sale.
Edition: 171
- 13 October, 2023
Technology
Huawei appears to have adapted its internal 5G modem to a novel 7nm process, one which eliminates the need for the industry-standard usage of FinFET transistors. KC Rajkumar finds it remarkable that SMIC may have been able to control the leakage profile of planar transistors just enough to make it possible for the Mate 60’s 5G modem to operate without obvious issues. The SMIC / Huawei 5G handset demonstrates that the expensive FinFET process may be unnecessary. A few years out, if mid-tier foundries were to duplicate the SMIC planar process, there could be risk to 7nm loading at TSMC.
Edition: 169
- 15 September, 2023
Semiconductors: No H2 recovery as foundry outlook worsens
Technology
Q2 clearly marked a turning point in the global semiconductor downturn with four out of the eight key segments Ingenuity monitors showing sequential growth and another two (smartphone & server) just barely missing the cut. WFE and Foundry were the outliers with both showing sequential declines. However, before anyone gets too excited about this positive turn of events, it’s important to keep in mind that the y/y comparisons remain in the red across the board. Furthermore, while the silicon wafer and memory segments both showed positive sequential developments, their problems are far from over. Finally, TSMC’s deteriorating FY23 outlook, despite an ongoing Nvidia-driven boost, underscores the reality that there is no H2 rebound on the horizon.
Edition: 169
- 15 September, 2023
Technology
AceCamp’s industry surveys show that TSMC has not decided to adopt TCB for the packaging of interposer on substrate in CoWoS for 3nm chips due to a relatively low yield rate and throughput. Similarly, Hynix is reviewing TCB but has not decided to adopt it for HBM3.5 in 2025/26. AceCamp expects ASMPT's orders to decline 33-50% q/q in 2Q23 due to weakening demand for industrial, automotive, and smartphones. The stock is trading at 25.7x/24.7x/22.2x 2023-25 PE, but sees the stock falling to 15-16x 2023/24 PE given -49%/+4%/+11% y/y EPS in 2023-25. Negative catalysts flagged include substantial order declines, market share loss and the shift to hybrid bonding.
Edition: 163
- 23 June, 2023
European & US short ideas
Since Vision pitched their short thesis on Vidrala, Verallia and O-I Glass at our Equity Shorting Conference in mid-Mar the stocks have underperformed the Stoxx600 by ~8%. In the last couple of months they have also initiated 3 new European shorts, 3 new US shorts, and has readied a new $7bn+ European short (trades ~$20m/day and has short interest of <1%) for initiation next week. Please join Vision for a meeting while members of their team are in Paris (Jun 5th-6th), Zurich (Jun 7th) and London (Jun 8th-12th).
In the last 24 months, Vision has closed several shorts including: Allegro, AutoStore, Boohoo, Burlington, Colruyt, De'Longhi, Electrolux, Gerresheimer, H&M, Hargreaves Lansdown, Inditex, New Relic, Nokian Tyres, Peloton, Similarweb, Thule, Trex, TSMC, UiPath and Whirlpool.
Edition: 161
- 26 May, 2023
Technology
Latest reset to FY outlook represents the last cut - the sales recovery into 2H23 now looks far more realistic (+20% vs. 1H23). The growth outlook for 2024 and 2025 is on track to return to the 15-20% CAGR target as N3 builds up to reach $25-30bn in annual sales (although near-term depreciation headwinds will temporarily weigh on margins). TSMC is also committing nearly $50bn in cumulative capex to build out overseas fabs which should lift some of the geopolitical concerns that have weighed on the shares. TSMC trades at just 13.8x earnings, a 30% discount to the SOX. For a dominant franchise that offers superior growth and returns to the wider sector, this looks very harsh.
Edition: 159
- 28 April, 2023
A new $3bn+ M/Cap European industrial short
Industrials
Trades >$10m/day and has <1% short interest - will be lapping price increases at a time when volumes have turned negative and there are substitution threats and declining per capita usage of products at some of its largest customers. It trades >10x EV/EBITDA on 2023 estimates that call for 40% growth in EBITDA.
In the last 24 months, Vision has closed several shorts including: Allegro, Boohoo, Colruyt, H&M, Inditex, New Relic, Nokian Tyres, Peloton, Similarweb, Thule, Trex, TSMC and UiPath.
Edition: 154
- 17 February, 2023
Technology
Poor results and weak guidance - this is more about execution than the economy. Instead of 2023 EPS being c.$3.75 (PER 9.6x), EPS is now likely to be $2.00 to $2.25. This (again) brings down the “shut your eyes and buy it” moment from $36 per share to $20. INTC is no longer a value stock as its earnings have evaporated and one must now look through to the recovery. Although this is far from certain as Richard Windsor still has concerns re. the longevity of the x86 processor design and INTC’s financial strength is weakening fast. Qualcomm, MediaTek, and TSMC remain far better places to be in the semiconductor sector at the moment.
Edition: 141
- 05 August, 2022
Technology
Long-term peril? The foundation of its semiconductor advantage appears to be crumbling. TSMC’s current position was enabled by three key factors: globalisation, China’s participation in the US-led international order and Taiwan’s innovation edge. TSMC’s technological edge could preserve its position for the next couple of years, but bullish expectations of annual long-term revenue growth in excess of 15% appear foolhardy. While nationalism may be more pronounced in the case of semiconductors, OWS sees this concept of deglobalisation leading to higher inventories and concomitant margin pressures in other industries as well.
Edition: 140
- 22 July, 2022
Technology
As companies adjust to a down economic cycle, topping the list of corporate priorities should be to contain costs / expenses and maintain a healthy FCF. INTC should be no exception. While cutbacks in opex are to be expected, KC Rajkumar believes there is low-hanging fruit in the cost domain for the CFO to rationalise. The option is not without risk, but hard times call for bold measures. KC thinks a viable case can be made for INTC to pull out of TSMC’s 3nm foundry service slated to start in 2023/24.
Edition: 138
- 24 June, 2022
Technology
The strangest profit warning - Richard Windsor questions the validity of MSFT’s claim that USD strength is to blame and sees a difficult quarter ahead. Looking at the wider Technology sector, he notes that while many stocks have already fallen by 70%+ they could easily halve again. Stick with the value end of the sector and semis in particular. He favours Qualcomm, TSMC and MediaTek as companies with reasonable growth ahead, strong positions in their markets as well as valuations that are less than 15x 2022 PER.
Edition: 137
- 10 June, 2022
TSMC’s massive $40bn+ capex plans has all the hallmarks of peak cycle
Robert Windsor believes history will repeat itself and that there will be a sharp downturn as new capacity comes online and demand moderates at the same time. The industry has a fundamental mismatch between supply which is lumpy (fabs) and demand which is smooth, and so, while the causes of every semiconductor cycle are different each time, the result is always the same. The sector has performed extremely well over the last 18 months, but some valuations look pretty stretched and the looming downturn threatens to unwind a lot of the gains.
Edition: 127
- 21 January, 2022
Semiconductors: The new oil; East Asia to benefit the most
Rory Green explores the mounting importance of semiconductors. Over the next three years the winners will be the ones that have a physical integrated circuit trade surplus and/or a technical one; East Asia has both, and the US possesses the former. China is a semiconductor twin-deficit country with insufficient domestic production and a dearth of advanced IP, and leading-edge production will remain out of their hands for the future despite Beijing’s efforts. Investors should take a “buy on dips” approach for leading semiconductor capital providers and firms with monopolies (TSMC, ASML, etc.). Consider Chinese national champions, for they are too big to fail from a political and national security perspective. For short-term trading ideas, early signs of Dutch disease point to a strong secular tailwind to TWD and KRW, both tied increasingly to semiconductor cycles - the FX weakness provides an entry point for long KRW and TWD positions against EUR.
Edition: 109
- 30 April, 2021