Organization: Semiconductor Sector May See Sentiment Bottom, with Focus on AMD, Western Digital, and SanDisk Earnings This Week

August 4th. After a sharp decline in July, the semiconductor sector's sentiment is starting to improve. The PHLX Semiconductor Index recorded its worst monthly performance since 2008 last month, dropping over 20% from its June peak. However, on Monday Eastern Time, Nvidia rose nearly 3%, AMD rose about 2%, and the SOX index closed up around 1%; the previous Thursday, the SOX saw a one-day surge of 8.2%, marking its largest gain in 15 months. The market focus is shifting from "Is AI trading overheated?" to "Which companies still have performance support after the sharp fall".

Jefferies' assessment is the most direct. The bank stated that Microsoft and Amazon's latest financial reports provided important evidence that large-scale AI investment is bringing tangible returns to customers and infrastructure providers. As both companies are core buyers in the Nvidia, AMD, Broadcom, storage, and network chip supply chain, as long as cloud companies continue to purchase computing power, chip orders will still be supported.

Citi emphasized industry chain differentiation in its report. The bank believes that the recent semiconductor pullback mainly stemmed from concerns about oil prices, U.S. bond yields, and AI capital spending, but this round of decline presents a buying opportunity. Citi points out that the data center remains the strongest end-market, accounting for approximately 34% of semiconductor demand, and is expected to exceed the entire semiconductor TAM by 2030. The bank also stated that among the companies that have released their financial reports, revenue expectations for 2026 and 2027 have been raised by 4% and 7% respectively, and EPS expectations have been raised by 7% and 8% respectively. At the same time, Citi prefers semiconductor equipment stocks because the capital expenditure increase by TSMC, Intel, and others has a more direct impact on the equipment chain.

BofA expects hyperscalers' total capital expenditure this year to reach around $860 billion, an increase of about 80% year-on-year. This provides valuation support for GPU, ASIC, HBM, advanced packaging, and equipment chains.

UBS CIO stated that investors' sentiment improved after hyperscalers announced accelerated cloud growth and signaled further increases in AI spending. The bank expects AI spending to reach $900 billion this year, rising to $1.2 trillion by 2027, reinforcing a constructive view of semiconductor and hardware demand.

Morgan Stanley views this week's financial reports as a new validation point. The bank expects AMD, SanDisk, and Western Digital to deliver "another set of strong performance". These three companies have remained strong targets in the AI hardware chain this year: AMD has doubled, Western Digital has more than doubled, and SanDisk has risen approximately 400%. If AMD and storage manufacturers' financial reports continue to confirm demand strength, the chip stock recovery rally will have more confidence.