Last week, on May 10, several Chinese semicap stocks experienced notable sell-offs, with NAURA, AMEC, and Piotech declining by -5.1%, -3.7%, and -2.6%, respectively.
This decline was attributed to concerns stemming from SMIC's reported remarks during their 1Q24 earnings call regarding overcapacity and reduced capex for the following year.
However, analysts assert this interpretation is misguided and advise investors to capitalize on the market dip. Contrary to fears, SMIC did not revise its capex guidance for 2024 nor indicate a downward revision for 2025. Furthermore, SMIC's CEO clarified that while there might be a slight reduction in mature node capex in 2025, the overall capex remains unchanged.
The misunderstanding surrounding SMIC's statements has created an opportunity for investors, according to Bernstein, with recent data indicating strong demand for domestic equipment in the semiconductor industry. The firm notes that AMEC, NAURA, and Piotech have all shown robust growth metrics, suggesting resilience in the sector despite short-term fluctuations.
Overall, Bernstein recommends buying the dip, emphasizing that the sell-off is unwarranted and based on a misinterpretation of SMIC's comments. The underlying strength of the Chinese semicap sector, coupled with continued demand for domestic equipment, supports a positive outlook for investors.