Semiconductor companies lack sustainable competitive moats and will see astronomical profit margins crash when supply and demand equilibrate.
Too little corroboration in the last 3 days to call a trend (2 articles). Watching for it to gain traction.
Semiconductor stocks, including Nvidia, have declined as market participants question whether current profit margins can persist once supply constraints ease and competition intensifies. The thesis holds that without durable competitive advantages, chip makers will face margin compression as the market normalizes and excess returns disappear.
Margin sustainability is a core driver of long-term valuation multiples for semiconductor companies; if investors believe current margins are cyclical rather than structural, they will reprice earnings power downward and reduce the multiple applied to future cash flows. This perception directly affects how much premium investors will pay relative to near-term earnings, independent of actual demand trends.
"Wall Street was mixed with the Dow modestly up and the S & P 500 modestly down as semiconductor stocks fell again. Nvidia slid 2.1 per cent."
"Semiconductors then rose on the idea of seemingly limitless pricing power for chipmakers, but Joshi argued that investors are realizing that chipmakers don't have "moats" around their profits. He offered a prediction: "Astronomical margins will crash back to earth when demand and supply equilibrate, as they ultimately must.""