We noticed a recent analyst call on the semiconductor names that we just had to comment on.
Glen Yeung, Citi’s semi analyst, doesn’t deny that the industry is suffering through a period of high inventory levels. But he contends that historically, “when inventories have peaked semiconductor stocks have tended to be at or around their bottom. Thus, while bears still use inventories as an excuse to remain negative, we take the exact opposite stance.”
Sure. The only thing is, what makes them so sure that inventories have peaked? As we have mentioned once or twice (oh, what the hell - we’ve said it a lot), semiconductor equipment orders have been enormous. Do they think that equipment, once installed, won’t be put to use manufacturing more semiconductors?
We think the inventories will peak when orders start growing at a slower rate than end demand for semiconductors. We’ll let you know when it happens, but it is likely to be a few months.