The market volatility in the major tech names has continued to be elevated as worries around AI returns has surfaced. The industry fundamentals have however not changed and the strength in the areas around AI continues. Our data for July and August around manufacturingand exports from Taiwan and korea clearly points to further growth a not to forget the strong nmbers produced by TSMC for July. As a result of the current market environment, GP Bullhound Global Technology Fund declined by 3.73% in August.
Despite the market volatility, large-cap tech names have continued to do well, with solid Q2 earnings and overall strong forward-looking statements.
However, most stocks in our portfolio have been hit hard by the broader market sell-off, with the strongest YTD performers taking the biggest losses. Looking ahead, we believe current market estimates for 2024 and 2025 are still too conservative, and that many companies will grow into their valuations. In this environment, we are selectively buying on weakness to capture potential returns.
Q2 reporting season highlights:
TSMC's Q2 sales met expectations, with a gross margin of 53.2%, exceeding forecasts due to better utilization. Growth was driven by a 28% Q/Q increase in HPC demand, led by AI. Q3 sales guidance suggests 32% Y/Y growth with a projected gross margin of 53.5%-55.5%, well above earlier guidance. The industry fundamentals are strong with higher-than-expected growth and margins, but geopolitical risks are rising due to potential US restrictions on China and comments from Trump on Taiwan's defense. TSMC’s strategic importance remains high, especially as all 2nm and 3nm production will be done in Taiwan in the coming years.
ASML reported sales of €6.2bn and EPS of €4.01, beating estimates of €6.1bn and €3.72. As a result of a higher sales mix of older immersion machines with better margins, with China accounting for 49% of total sales. Order intake was slightly above cons. at €5.6bn, with EUV orders making up €2.5bn. While Q3 estimates were slightly below expectations, ASML maintained its full-year guidance, pointing to a stronger Q4. Despite solid performance, ASML's share price was impacted by rumors of potential US equipment restrictions on the Chinese market, alongside Trump’s comments on Taiwan's defense. Future restrictions might target tools used for production below 14nm - a small but crucial segment for Huawei.
Nvidia’s sales and EPS beat high expectations with stronger guidance also for the coming quarter. The shares solf off although on the numbers. The company is stating thet the Blackwell chip will sell in USD bn in 4Q and that Hopper sales will be up 2H on 1H. We did not see any weaknesses in the resut and expect continued strong execution from the company.
AMD's results were in line with expectations, with data center sales up 115% Y/Y. AI and the increased CPU market share from Intel were key drivers, with AI sales exceeding USD 1bn in the quarter. AMD now forecasts AI sales to surpass USD 4.5bn this year, likely approaching USD 5bn. The company is gaining CPU market share, and its cyclical segments are recovering, suggesting a strong outlook for H2 2024 and 2025. Tight AI supply is also positive news for AMD's suppliers.