Sell hard! Chip giants plummeted across the board! U.S. stocks suddenly hit major warning
The sell-off continues to spread. Before the U.S. stock market opened on July 7, the memory chip sector fell across the board, with Micron Technology, SanDisk, and Western Digital falling more than 6%. During the Asia-Pacific trading session, South Korean chip giants Samsung Electronics and SK Hynix both fell more than 6%. Some analysts pointed out that although Samsung Electronics' second-quarter operating profit surged more than 18 times year-on-year, its stock price fell sharply, reflecting the market's deep doubts about the sustainability of the AI (artificial intelligence)-driven market. At the same time, many Wall Street institutions warned that the current U.S. stock market not only has price bubbles, but also hidden profit bubbles.
The sell-off continues to spread. Before the U.S. stock market opened on July 7, the memory chip sector fell across the board, with Micron Technology, SanDisk, and Western Digital falling more than 6%. During the Asia-Pacific trading session, South Korean chip giants Samsung Electronics and SK Hynix both fell more than 6%. Some analysts pointed out that although Samsung Electronics' second-quarter operating profit surged more than 18 times year-on-year, its stock price fell sharply, reflecting the market's deep doubts about the sustainability of the AI (artificial intelligence)-driven market. At the same time, many Wall Street institutions warned that the current U.S. stock market not only has price bubbles, but also hidden profit bubbles. If the expected earnings growth rate of the company is revised to the historical normal growth rate, the valuation of the S&P 500 Index will soar to 67.6 times the price-to-earnings ratio. U.S. chip giants collectively fell On the afternoon of July 7th, Beijing time, in pre-market trading on the U.S. stock market, the semiconductor and storage sectors fell across the board. As of press time, Western Digital fell by more than 7%, Micron Technology and SanDisk fell by more than 6%, Seagate Technology fell by more than 5%, Applied Materials and AMD fell by more than 4%, and Intel fell by more than 3%. At the same time, Nasdaq 100 index futures also continued to fall, falling more than 1% at one point. During today's Asia-Pacific trading session, Samsung Electronics closed sharply down nearly 7%, and SK Hynix fell more than 6%. Hong Kong storage concept stocks also plummeted across the board. Samsung Electronics, a two-time long company in the South, fell by more than 16%, Hynix, a two-time long company in the South, fell by more than 15%, GigaDevice Technology fell by more than 12%, and Montage Technology fell by more than 10%. On the news, before the Korean stock market opened on Tuesday, Samsung Electronics released its preliminary second-quarter performance report. Although its performance was extremely impressive, it still failed to meet investors' high expectations. The preliminary financial report for the second quarter released by Samsung Electronics shows that in the three months ended June 30, Samsung initially recorded an operating profit of 89.4 trillion won (approximately US$58 billion), soaring 18 times year-on-year. This figure easily exceeded the median forecast of 84.2 trillion won by analysts. At the same time, Samsung's revenue in the second quarter also doubled to 171 trillion won, slightly exceeding market expectations. Analysts pointed out that under cautious market sentiment, any financial report that fails to bring enough shock will become an excuse for investors eager to make profits to cash out. Market logic has shifted from looking at profit growth to looking at cash flow and shareholder returns. Brian Cho, a portfolio manager at Causeway Capital Management, a global equity asset management institution, pointed out that the market currently pays more attention to whether the company's annual free cash flow generation ability has ushered in a sustainable step change. In addition, management's shareholder return policy will also be the focus of attention. Morgan Stanley Asia-Pacific technology analysts Shawn Kim and Ryan Kim said in the latest report that the three core controversies in the current memory chip market are: whether the price increase cycle has peaked, why the long-term agreement (LTA) failed to promote valuation revaluation, and whether this is the top of the cycle or a bull market relay adjustment. Morgan Stanley said that the real moment of verification will be the second quarter earnings season of 2026 - if hyperscale cloud vendors maintain or raise capital expenditure guidance, it will be a good buying opportunity for storage stocks; if it is lowered, the excess narrative will continue to ferment. According to the report, since the rise of the generative AI wave in November 2022, the storage sector has experienced three cyclical corrections (corresponding to -15% in the US-Iran conflict, -32% in profit-taking after a sharp rise, -20% in the so-called reciprocal tariff day, and the current correction of approximately -17%). Morgan Stanley characterized these corrections as normal corrections in a structural bull market, rather than the beginning of a bear market. Morgan Stanley concluded that the current market is extremely crowded and funds are preparing to rotate into stagflation sectors. The long-term outlook is still bullish (earnings are expected to grow by 35%-40% in 2027), but we need to be wary of corrections in the short term. Panmure Liberum analysts Joachim Klement and Francisca Reis warned in the latest report that the current U.S. stock market is brewing both a "price bubble" and an "profit bubble."
The report pointed out that if the cyclically adjusted Shiller CAPE is used as the benchmark and the company's expected earnings growth rate is revised to the long-term normal growth rate, the current valuation of the S&P 500 will be as high as 67.6 times, surpassing the peak of all asset bubbles in U.S. history. According to Dow Jones Market Data, the forward price-to-earnings ratio of the S&P 500 has dropped to 20.51 times from 22.4 times a year ago, even though the index has risen by about 20% during the period. Behind this phenomenon is that the earnings forecast given by Wall Street exceeds the stock price increase itself. Peter Berezin, chief strategist at BCA Research, warned that U.S. stocks could fall by 30% to 50% once the bubble bursts. Analysts point to ultra-large cloud computing companies such as Microsoft, Google, Amazon, Meta, and Oracle as the core risk of the current U.S. stock profit bubble. Klement warned in an op-ed in the Financial Times that the "supernormal" profits in U.S. stocks cannot last forever. As the above-mentioned technology giants continue to invest heavily in the construction of AI data centers, their business models are transforming from light assets to heavy assets. This structural change will suppress the profit growth rate and gradually return it to normal levels. However, Klement acknowledged that such high-profit growth cycles often last longer than investors expect, and the current profit growth trend may still continue for several years. Damped Spring Advisors CEO Andy Costan previously said that the U.S. economy is not growing fast enough to support the profitability levels preset by Wall Street analysts. Wall Street veteran Jim Paulsen also publicly stated recently that the current market's excessive optimism about earnings has posed risks. According to the latest survey by Markets Pulse (MLIV), 53% of investors plan to buy more shares of traditional companies in the second half of the year due to concerns that AI-related companies are overvalued. (
The report pointed out that if the cyclically adjusted Shiller CAPE is used as the benchmark and the company's expected earnings growth rate is revised to the long-term normal growth rate, the current valuation of the S&P 500 will be as high as 67.6 times, surpassing the peak of all asset bubbles in U.S. history. According to Dow Jones Market Data, the forward price-to-earnings ratio of the S&P 500 has dropped to 20.51 times from 22.4 times a year ago, even though the index has risen by about 20% during the period. Behind this phenomenon is that the earnings forecast given by Wall Street exceeds the stock price increase itself. Peter Berezin, chief strategist at BCA Research, warned that U.S. stocks could fall by 30% to 50% once the bubble bursts. Analysts point to ultra-large cloud computing companies such as Microsoft, Google, Amazon, Meta, and Oracle as the core risk of the current U.S. stock profit bubble. Klement warned in an op-ed in the Financial Times that the "supernormal" profits in U.S. stocks cannot last forever. As the above-mentioned technology giants continue to invest heavily in the construction of AI data centers, their business models are transforming from light assets to heavy assets. This structural change will suppress the profit growth rate and gradually return it to normal levels. However, Klement acknowledged that such high-profit growth cycles often last longer than investors expect, and the current profit growth trend may still continue for several years. Damped Spring Advisors CEO Andy Costan previously said that the U.S. economy is not growing fast enough to support the profitability levels preset by Wall Street analysts. Wall Street veteran Jim Paulsen also publicly stated recently that the current market's excessive optimism about earnings has posed risks. According to the latest survey by Markets Pulse (MLIV), 53% of investors plan to buy more shares of traditional companies in the second half of the year due to concerns that AI-related companies are overvalued. (