00:00Semiconductor stocks dragged down again of what's expected to be another blockbuster debut this week.
00:04Mike Shepard is Bloomberg's Senior Editor for Technology and Strategic Industries and joins us now.
00:08Mike, great to see you as always. I know that you've had your eyes trained on the SOX,
00:12the Philadelphia Stock Exchange Semiconductors Index.
00:16You've watched all of these undulations over the last few weeks.
00:18And I guess the broad question I have is, is a rotation underway?
00:22How much anxiety is there among investors about the runway that AI has?
00:26Well, we sure did see a fair amount of anxiety over the past week.
00:30The SOX, as we know it affectionately, is down about 10 percent over the last five trading days before the
00:38holiday break.
00:39And when we look at it, we see that investors really are showing concerns that maybe this big run up
00:46in AI infrastructure spending
00:47may not have legs to continue much past 2026, at least at the same pace.
00:54Now, what we have to do, though, is we have to look back at the full year of trading in
01:00SOX,
01:00which represents a lot of the biggest chip makers out there, including NVIDIA and AMD and others as well.
01:08Now, when we look at it over the past year, it's up more than 78 percent.
01:13And that is indicative of, you know, the broad based belief that AI infrastructure spending not only has legs,
01:20but it has some staying power.
01:22And that really is also fueled by what we're seeing from the biggest AI developers,
01:27the publicly traded ones, at least for now, Alphabet Inc., Meta and others.
01:32They have indicated they intend to continue spending really what they've forecast altogether to be $725 billion in 2026 alone
01:43and have indicated that they intend to do more of the same.
01:46Some of the heebie-jeebies, though, David, really stem from what we saw OpenAI move to do.
01:53We have reporting that they are planning to pull back their IPO until 2027.
01:59And that really set people to thinking, hmm, maybe this doesn't have as much legs as we had originally thought.
02:05But we're going to have to see how the trading plays out come Monday.
02:08Heebie-jeebies. I like that.
02:09I mean, I was going to ask you, is that what you're seeing with Micron?
02:12Micron, they posted record earnings, but they lost nearly 20 percent last week.
02:16Is that just people kind of reality checking themselves?
02:19Has it gotten a little bit out of control or is this, you know, a bigger slide for this particular
02:22company?
02:23Well, yeah, that's a great question there, because what we do see with Micron, again,
02:28is just a huge run up in the stock over the, you know, really since the start of the year.
02:33It's up more than 240 percent, really in the anticipation that the AI infrastructure boom and the demand for its
02:42memory products to go into those AI processors in all those data centers will really be almost unrestrained.
02:50And yet through the course of the year, we have seen this stock take some pretty big ups and downs.
02:55And even on the way up, it has not been a really steady climb.
03:00It really has had some ups and downs, and it will continue to do so.
03:04All that said, there is still just such strong demand for memory products from Micron and others in this space.
03:13There are only a handful of memory makers in the world that really compete in this at scale in this
03:19AI space.
03:19Samsung and SK Hynix are the other two.
03:22And they are just seeing record demand for their products going well into 2027.
03:27And it's to the point that, you know, there is intense competition for those memory devices and components to go
03:35into not only the AI processors, but also just into common goods like our phones.
03:41You mentioned SK Hynix.
03:43Let me dig into that a little bit here because we're waiting for the debut of an ADR, an American
03:47depository receipt of that company, that South Korean company expected in the coming days here trading on the NASDAQ.
03:53I'm struck just reading about this, Mike, about what the ramifications of that might be.
03:57This is a company that makes that kind of high bandwidth memory that you're talking about, which is so integral,
04:01of course, to AI infrastructure.
04:03I see warnings that the South Korean government is looking about how this might affect the won in that country.
04:09Obviously, a lot of banks are involved in this debut.
04:11It's going to have a huge impact for them.
04:13Bloomberg doing a lot of reporting on what fees they might be charging or getting as a result of this
04:17debut.
04:18Talk a bit about this company and how similar a moment this is.
04:21You mentioned Micron.
04:21A lot of companies, I think, that are very much in the lexicon that we talk about a lot here.
04:25This is one that maybe a lot of people aren't talking about or haven't been talking about as much.
04:28Well, this really is, you know, the debut in a lot of ways for this company for the U.S.
04:35market.
04:35It has really vaulted into such prominence because of the AI trade.
04:41Unlike its competitor, Samsung Electronics, SK Hynix really is kind of a memory company.
04:46That is their thing.
04:47And they have seen their stock in South Korea really soar as a result of its strength in this area.
04:54They're a key provider, for instance, to NVIDIA of memory that go into the memory devices that go into those
05:03fancy processors designed by NVIDIA.
05:06So this is a moment for them.
05:08They plan to issue the equivalent of 2.5 percent of their stock to U.S.
05:14investors through this American depository receipt process in New York that begins tomorrow.
05:20And what we're looking for is perhaps as much as $26 billion being raised as a result.
05:27The amount is not set.
05:29It could go up a little bit, could go down.
05:30But, David, it could be as much as what Saudi Aramco raised in its IPO on the local exchange there
05:38in Saudi Arabia.
05:39That was $29 billion.
05:41It's far short of, of course, what SpaceX raised not too long ago of $86 billion.
05:47But still, it's a huge statement.
05:49And they are looking to raise this capital to continue their expansion of physical plants and production around the world,
05:57including some here in the U.S., as it would happen.
06:00Mike, you talked about this a little bit, but every time I think I've reached the floor of acronyms I
06:05need to learn here at Bloomberg, you too and others find like a sub-basement of things I don't know.
06:10So ADRs, this is this thing you were just talking about, this American depository receipt.
06:14Why is this different from something like the SpaceX IPO?
06:17Can you explain how the differences work?
06:19And then it's already listed on the Korean exchange.
06:23It's already on the Cosby.
06:24So why do they want to be on NASDAQ as well?
06:25What does that get them?
06:27Well, you know, if you and I want to trade this during our day, it's hard to do.
06:31We would have to really invert our hours.
06:33And we would also have to deal with the patchwork of local regulations to be able to trade it.
06:38We'd have to, you know, find a custodian bank and others to deal with in South Korea.
06:44And, you know, for investors here, you want to be able to work during your daytime hours and also not
06:50have to deal with all the hassle, not only one regulatory systems, but two, in essence,
06:54because you would also have to deal with, you know, local rules here in the U.S.
06:59So what investors typically do and companies do that want to list in the U.S. from outside the U
07:05.S., they have this process of going through the American depository receipt where a bank here in the U.S.
07:13will offer to serve as sort of the vehicle.
07:15They will go out and buy shares en masse from the Korean exchange and then create, in essence, an American
07:23depository receipt is what it's called.
07:25But in essence, a vehicle that investors can buy and sell on U.S. exchanges here.
07:32And it gives the companies that want to list here an ability to do so, but without having to go
07:40through the full rigmarole of a parallel IPO here in the U.S.
07:44So it's a little bit less regulatory hassle and a lot more access for investors and customers that want to
07:51get a piece of the action here on these shores.
07:55Mike Shepard, lucidly put, I think a lot of folks who don't know what an ADR is will benefit from
07:59that.
07:59I literally answered all of my questions. Thank you very, very much.
08:03And, you know, we all love trading during daylight hours.
08:05Yeah, don't burn the midnight oil.
08:06Mike Shepard, editor at our Washington Bureau who oversees our coverage of strategic industries, including, of course, artificial intelligence.
08:11Mike, thank you for your time on this Sunday.
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