Nomura Securities: The memory chip shortage will persist until 2028, and the sector’s valuation is severely undervalued.

Approximately 7,900 high-net-worth investors in South Korea with financial assets over 3 billion won net sold Samsung Electronics and SK Hynix stocks between October 1 and 20, totaling 5.59 billion won and 9.24 billion won respectively, for a combined 14.83 billion won (around $11.2 million). Meanwhile, funds shifted to leveraged ETFs: KODEX Semiconductor Leveraged ETF saw net purchases of 33.2 billion won in the same period, while KODEX Leveraged ETF and KODEX 200 ETF recorded net buys of 22.5 billion won and 10.5 billion won respectively; the inverse double-leveraged ETF tracking the KOSPI 200 index was net sold 8 billion won. Data shows these investors did not fully exit South Korea’s semiconductor sector and stock market, but instead shifted from direct holdings of chip leaders to betting on gains in the sector and broader market via leveraged ETFs. However, leveraged ETFs’ daily return-tracking mechanism may amplify losses in volatile markets, leaving investors exposed to higher drawdown risks.

AI infrastructure investment is emerging as a key pillar of U.S. economic growth, though it has yet to deliver a noticeable long-term productivity surge. Economists project that the U.S. real GDP annualized growth rate for the third quarter will come in at around 3%, driven primarily by consumer spending and AI-related business investment, with corporate capital expenditure on data center construction and computing equipment purchases continuing to expand. However, this investment growth does not mean AI has significantly lifted overall economic efficiency. Currently, the U.S. potential economic growth rate remains stuck at roughly 2%, and the Congressional Budget Office (CBO) forecasts a long-term potential growth rate of approximately 1.8%. Economists note that recent improvements in labor productivity cannot yet be confirmed as AI-driven, and more data is needed to validate related gains. Meanwhile, the U.S. economy still faces inflationary pressures. S&P Global data shows that the U.S. October flash Composite PMI fell to 57.6 from September’s 58.4, but the Output Prices Index rose to 59.8, its highest level since August 2022, signaling that corporate cost pressures continue to intensify. Whether AI investment can eventually translate into sustained productivity gains remains a key factor for the U.S. economy to break through its long-term growth bottleneck. At this stage, trillions of dollars in investment plans are insufficient to prove that the U.S. has entered a new phase of sustained economic growth acceleration.

According to U.S. SEC filings, Bitcoin treasury firm Strive signed a sales agreement on October 26 with seven institutions: Cantor Fitzgerald, Barclays, Clear Street, StoneX, B. Riley Securities, Maxim Group, and H.C. Wainwright. The company plans to sell up to 15% of its Series A perpetual preferred stock (ticker: SATS) with a total offering value of up to $1 billion via an at-the-market (ATM) offering on an irregular basis. The filings show the preferred stock carries an annual dividend rate of 15% and a $100 par value per share. Strive may conduct the issuance through existing trading venues such as Nasdaq or other legal channels based on market conditions, with the seven firms acting as selling agents entitled to a maximum commission of 2% of the total proceeds per sale. This offering is an additional issuance, separate from the 7 million SATS preferred shares already issued. The filings add that Strive may issue shares on an irregular basis depending on market conditions, with the actual issuance size and timing subject to the company’s arrangements and market environment.

According to BIT (Bit.com) market data, Apple’s pre-market U.S. stock dropped 1.44%. On the news front, Apple’s first foldable smartphone, the iPhone Duo, has seen screen damage near its hinge since launching in major markets on October 23. User-uploaded photos show some devices have white ray-like cracks starting at the hinge’s center and extending to the lower right of the screen. Industry insiders note the defect is concentrated at the same hinge position, likely tied to hinge design, meaning Apple may have to redesign the relevant structure. Reports add that Apple faced hinge supply challenges during R&D: its initial first supplier, U.S.-based Amphenol, was replaced by Taiwan’s Xinri Xing (Sunny Precision) due to lower-than-expected production yield, but the latter also encountered manufacturing difficulties and only supplied "golden samples" that met standards. Apple previously stated the iPhone Duo’s hinge comprises over 100 components and uses a 3D-printed hinge module. With the product now in mass production, Apple may resolve the defects while minimizing design changes, possibly by reducing hinge components. Reports highlight the hinge issues could impact product delivery and sales performance. Per Apple’s supply expectations shared with suppliers, as of the end of this year, component supply corresponding to the iPhone Duo’s full production capacity is around 6 million units. Separately, component supplier Fine M-Tec has stated that recent quality issues with the related products are unrelated to the components it supplied for assembly.

QCP Capital noted in its daily market report that BTC fell below $80,000 over the weekend amid news of the Middle East situation and outflows from Bitcoin spot ETFs, triggering liquidations of leveraged long positions. Currently, BTC has retreated to the bottom of its recent trading range, with market participants awaiting the U.S. Federal Reserve’s policy-setting meeting scheduled for October 27-28. QCP added that earnings reports from Microsoft, Google parent Alphabet (due Wednesday U.S. time) and Amazon (due Thursday) will act as key market variables. If the results validate the justification of massive AI-related capital expenditures, tech stocks could see valuation recovery; conversely, selling pressure on AI trades may intensify further. Additionally, oil prices, down roughly 2%, are another major factor weighing on markets. On the macro front, the Fed is widely expected to hold interest rates steady, though market pricing puts the probability of a December rate hike at nearly 84%, with Chair Warsh’s press conference drawing close attention. The U.S. 10-year Treasury yield stands at around 4.96%, down from its recent one-year high near 5.3%. QCP’s key price levels are: BTC support at $78,000, resistance at $86,000; ETH support at $2,150, resistance at $2,500. Separately, ETH spot ETFs have recorded outflows for four consecutive weeks.

TSMC plans to shrink the area of high-density 6T SRAM (Static Random-Access Memory) bit cells to below 0.017 square micrometers in its A14 process, which is targeted for mass production in 2028. The move breaks a long-standing stagnation of around 0.021 square micrometers for SRAM cell size since the N5 process launched in 2020. According to reports, TSMC is expected to unveil the relevant research results by the end of the year. Based on currently disclosed data, the A14 process’s SRAM cell area is expected to outpace Intel’s 18A process; Intel previously announced its high-density SRAM cell size is 0.021 square micrometers. As Samsung has not yet disclosed the specific SRAM cell dimensions of its latest process, a direct comparison is currently not possible. SRAM is a critical storage component for on-chip caches in CPUs, GPUs, and AI accelerator chips. Shrinking the cell area allows more cache to be packed into the same chip area, helping alleviate data access bottlenecks in AI chips and improve performance and energy efficiency. TSMC noted that the A14 process targets a 10-15% performance gain, 25-30% power reduction, and roughly 20% higher chip density compared to its N2 process. The A14 process is currently progressing toward its 2028 mass production goal, but its final yield, cost, and customer adoption remain unconfirmed.