Prof G Markets - Chip Stocks Are On Fire — Will It Last?

Episode Date: July 1, 2026

Ed Elson is joined by Stacy Rasgon to break down why chip stocks had their best quarter ever and how long he thinks the boom will last. Then, Rohan Goswami joins the show to discuss why Comcast is spinning off all its remaining media assets and what it means for the future of conglomerates. Finally, Ed gives his take on Trump’s strategy to lower gas prices. Stacy Rasgon is a Senior Analyst at Bernstein. Rohan Goswami is a Business Reporter at Semafor and the co-host of Compound Interest. Subscribe to the Prof G Markets Youtube Channel  Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [e-mail] Learn more about your ad choices. Visit podcastchoices.com/adchoices

Money markets matter. If money is evil, then that building is hell. Welcome to Profi Markets. I'm Ed Elson. It is July 1st. Let's check in on yesterday's Market Vitals. The major indices climbed as stocks closed out their best quarter in six years. The Dow finished its best first half since 2021,

and the Russell 2000 Raptor of its best first half since 1991. Meanwhile, Brent Crude was roughly flat on the day as investors awaited news from talks in Iran. The yield on 10-year treasuries climbed as job openings data showed a stable labor market. And finally, Bitcoin dipped below $60,000 once again. Okay, what else is happening? Semiconductors just posted their best quarter ever. The Philadelphia Stock Exchange Semiconductor Index rose 82% in the second quarter. and is up 94% so far this year. Western Digital is up 240% year-to-date. Micron is up 310%. Sandisk is up more than 700%. But the rally

hasn't been entirely smooth. Last week, chip stocks fell 8% in their worst week since April 2025. But that isn't saying that much. Still, the stunning run-up and the turbulence along the way leaves investors with one big question. And that is, how long? long can this semiconductor boom actually lost? Joining us to help answer that question, we are speaking with Stacey Razgon, senior analyst at Bernstein. Stacey, thank you so much for joining us on the show. This has been just a crazy run-up that not many people predicted. I mean, AI is winning, but not everyone in AI is winning. Big Tech certainly isn't, but the semiconductor stocks are we'll get into how sustainable this actually is,

but first, just your reflections on what's been a crazy quarter. You bet, and I mean, semis have been the primary beneficiary here, and as you said, the Sox index is up almost 100%. Actually, may even be 100% after today's close, a year-to-date. And AI has just gotten so big, it's dragging everything along in the space. You could have almost owned anything, you would have been just fine. It's interesting, though, some of the divergences we've seen this way, So that the traditional sort of like blind AI winners

that you would think the invidias and the broadcomes of the world that are doing the actual AI accelerators, they've actually had the worst performance. They're up, but they're up not anywhere near as much as the sector. And the reason is people been playing the so-called bottlenecks. Again, as AI has grown like sort of one area of the space at a time followed by the next, you've been sort of hitting the limits of what they can supply and then prices go up.

And, you know, semi-investors love to play bottlenecks, and so the stocks have gone up. And, you know, we went from the accelerators to the memory, to the semi-cap, to the optical, to the networking, to the power semis, to the Cpues. Now people are playing discreetes and other things. It's really been kind of remarkable. Overall, though you could have owned almost anything in the space year today. You would have been sitting pretty pretty. Yeah, semiconductors now make up a fifth of the S&P.

Is it that much? Wow. which I just find stunning, 20% of the entire market. I mean, when you look at that divergence between sort of the obvious AI names and the less obvious AI names, and I think that is a pretty good distinction as to who's been winning in this market and who hasn't, at least in 2026, I mean, is that just investors speculating, having a lot of fun with these more obscure names?

I mean, why are they so excited about Iran? name in a bottlenecked up sector versus like, you know, invidia. You know, it really has been about earnings. And frankly, even with the space up 100% year-to-date, you sort of like decompile it into the drivers, you know, probably 70% plus of that performance has actually been earnings growth. So like multiples in the space are up. And I won't say that like the space overall is expensive, but it's not egregious.

And by far and away, the earnings so far, year-to-day have grown much more than the valuations have. And some of these bottlenecks, we've just seen massive revisions. I mean, take memory, for example. I don't cover the memory space, by the way. It's a colleague of mine, but to talk about the industry rather than the stocks, I mean, we've just seen some phenomenal positive revisions in the earnings powers. You know, memory prices have just gone through the roof, as through the roof as supply has gotten really tight as AI has grown. And it's just driving massive revisions in the earnings. We're seeing that among the number of the bottlenecks. I think for some of the other ones, there's the hope or the strong belief that numbers as strong as they are

right now are just too low, given where AI demand is growing. And again, you can look at semi-cap or maybe some of the optical names or some of the other ones that are playing out right now. You can just look out at where people are forecasting demand to be, and you can see where the numbers are sitting right now, and it's clear that one of those things is wrong, like either the demand is not going to be there or numbers broadly probably still need to come up. And in many cases across the board. And that's why you've seen some of these other names respond. And so I don't know that it's necessarily unjustified. Again, I wonder why some of the other compute names haven't performed as well, because numbers there, I think, are going up too. But I think maybe they're more well-known

or more like heavily anticipated that you will see that kind of performance. And again, there's only so much money to go around, right? Investors have to invest in something. And I think there's been a belief among the more traditional guys that, you know, they're safer. You can use them as a source of funds in some sense to play some of these more other, like, esoteric names. Because you know, like, numbers, at least for the big guys, are going to go up anyways, that there's less risk from doing that. And so we've just some of the funds shift into other areas, I think. It seems like one of the most important question for semis and therefore for the entire market, because they make up a fifth of the entire market,

is will this last? Specifically, these incredible earnings, which are largely a result of huge demand leading to huge prices. And the question then becomes, is this a one-off? Is this cyclical? Which is a big question in the semi's business.

Or has something fundamentally changed and our earnings just going to skyrocket or at least be at this level forever? What do you think? Probably there's some elements of true. from all of those things. Like, semis, I think, are cyclical, and they always have been, and they probably always will be, but there's a variety of different types of cycles and different durations, and, like,

you could argue that this cycle has duration. And let's take the memory space, for example. And that's probably one of the areas we've seen the biggest price increases as well, which is driving all this. But the reason is, as you said, demand is very strong and supply is very tight. And, you know, this time is different as always sort of a dangerous statement, but there are some things that are different. Take the DRAM space, for example.

Like DRAM is, like in your PC, it's like the system memory that's running things as you're working. And AI uses a specific type of DRM memory. They call it HBM or it's called S stands for High Bandwidth Memory. And it sits on the AI chips that get sold. But to make, say, a gigabyte of high bandwidth memory takes four times as much capacity versus making a gigabyte of like the standard, what would be called DDR5 DRM that would go into your PC or smartphone. So you're in a scenario where you could be. adding, you know, wafer capacity to make DRAM for AI. And actually, even though you're adding a lot of waferies,

you're not necessarily adding as many bits as you ordinarily would because of this, this differential in how many wafers are. I should call it a trade ratio. Right now it's like four to one between AI memory and traditional memory for DRAM. And so because of those dynamics, I mean, the other thing I should say is it takes time to add supplies. And one of the issues right now is we're short on what's called clean rooms. So to add supply, like there's a whole industry.

It's called semiconductor capital equipment. They make the tools that make semiconductors. But before I can sell those tools and add capacity, I need to have somewhere to put them. You need what are called clean rooms. These are the buildings, right, that the factories, they make up the factories. And we're short clean rooms right now. So they have to build the clean rooms first. And then you can add the tools and add the capacity.

And it just takes time. I mean, like this year for total semiconductor manufacturing equipment, will probably do $145 billion, which is up 20% year of year. It's a strong year. But as strong as it is, it's a constrained year. The clean rooms don't come online

until either well into next year and beyond. In the meantime, demand is still growing. And so it's entirely plausible that this cycle, this up cycle, could last quite a while. Are there any names? It sounds like you think that ultimately the growth is pretty justified

given the fact that the earnings have been pretty staggering, so far. So far, Again, I would say as long as AI demand continues, and I would say if AI demand does not continue, we're probably screwed. We'll put that aside. All the signs right now seem to be pointing to continued strong demand, at least for now. It's a very interesting question. It seems like the biggest question for investors, can you put that aside?

Is it, I mean, do you build that into your model, or do you ignore it and assume that this continues? is how do you even grapple with that very big question? I'll say the same thing I've said since this started. At some point, will you see an air pocket? I mean, presumably you will. I mean, this is what always happens eventually. Only thing I can say is it's not now. It's certainly not this year.

Okay. It really does not look like it's next year. On 2028, I don't know. We'll have supply starting to come online in a bigger way in 28, and then it will be a question of demand. Why not this year or next year? Because some investors are concerned.

There's no incremental capacity. supply is tight in demand is very strong. That's not slowing down. You probably don't have to worry at all until supply starts to come on like in a big way. And then you'll see, you know, the title go up. We'll see if everybody's naked or not, right?

And this actually happened, you know, it wasn't that long ago a year, two years ago, when the actual accelerators, the GPs were in very tight supply. And by the way, I would say semi-investors always worried because there's a phenomenon that happens in many cases when supplies tight and customers can't get what they want on the time frame that they want,

is that they order more. It's called double ordering, right? And so the question is always, like when supplies to divide tight and demand is strong and you're adding capacity, is that demand you're adding for real or is it phantom? Right. This happened during COVID.

You know, we had big shortages and lead times stretched out and, you know, they added a bunch of supply and as it turns out like it wasn't needed and it took three or four years to actually work off that oversupply. On the other hand, you go back a year or two when the GPs and the accelerators were in tight supply,

and that supply came online in a bigger way and actually demand as the supply came along demand got stronger rather than the weaker. That demand was real. Right. So that will be the question. We probably won't know the answer for a couple of years. In the meantime for the next, you know, certainly for this year, like I said, and almost certainly for next year, supply is going to remain tight. And in that environment, you know, the people will act like the demand is going to be sustainable. So far, though, everything we've seen just points to everybody's short compute. That seems to be the case. again, it's not like people are reserving compute and just sitting on it.

Like they're reserving the compute and using it. The computer is getting used. We can have a discussion on what's the ROI and return on that. I think that's a valid discussion that we can have. But the compute is getting used. And in fact, they want far more. They want to be able to utilize far more compute right now than they currently available. Well, the ROI discussion is very interesting.

I assume maybe your view is that discussion won't happen properly. It's already happening. Or at least for the among the people who matter, in this case, the hyperscalers. I mean, it sounds like your view is... Oh, but it is happening. No, no, no, no. So it's... Investors are worried, right?

Because the hyperscalers are investing a lot of money, and they've sort of reached the limit of what their free cash flow can currently support. So there's top in the debt market. They're starting to raise some equity and like that kind of stuff. They still got plenty of capacity, but there is a worry that, oh, they're just invested. And people, for some reason, think that they're idiots. I actually don't know why.

These are some of the smartest and certainly most largest and most profitable companies in the history of mankind. They can see things that we cannot, and I presume that they are not idiots, like that they have line of sight to return. I think that they're already seeing returns

on some of the things that they're doing. You can look at some of the other things. I mean, you can look at, for example, GPU rental prices. You have like companies that are called neoclouds. Their business model is simply we have compute and we're renting it out. We're seeing those rental prices going up.

we're seeing five-year agreements on that capacity that are coming to an end, and that existing capacity, which at this point is fully depreciated, is now getting rented out at even higher prices, right? So those returns look just fine. You can look at other companies, like Anthropic, for example, who actually, like, has an agentic, they do agentic coding. They have a product called Claude that people are willing to pay for. Their revenues have gone vertical.

They're doing, I can't remember what the number is now, $62 billion in annualized revenue, something like that. And a month ago, it was like $44 billion. and a month before that it was 30 billion, and in January it was like 14 billion, and in December it was 9 billion, and a year ago was a billion dollars. And the revenues have gone like this.

I think the question for the ROI, people who are concerned about the ROI, though, is that all the businesses that are using, paying all that money for Claude, are they seeing ROI on their investment into Claude? It seems as though it goes one step further. Presumably they are, right? Like I said, it's, they're,

more and more companies are doing it. Again, it's hard to, this is the problem. It's hard to know on an individual basis at the end customer level, like what kind of return they're seeing and what kind of return they're not. All I can tell is that the supply of that computer, like the anthropics of the world, the demands on their capacity that they are seeing right now have gone vertical. So that is strongly suggested that somebody is seeing a return on this someplace. Stacey Razgon, senior analyst at Bernstein-Stacey, really appreciate your time.

Thank you. Oh, you bet. My pleasure. After the break, Comcast is breaking up. And for even more markets insights, you can subscribe to my weekly newsletter Simplyput at simplyput.profgemedia.com. We're back with ProfG markets. One of the world's largest media conglomerates is officially splitting up.

On Monday, Comcast announced plans to complete a spin-off of its media properties. The newly formed company will include Universal's film and television studios, its theme parks division, its broadcast networks, and its streaming business. What's left behind, the broadband, the Wi-Fi and the cable connectivity businesses will continue to operate under the Comcast umbrella. The stock is up more than 5% on this announcement. So to break down this decision from Comcast and why they're doing this, we are speaking with Rohan Goswami, business reporter at Summer 4.

Rohan, good to see you. this is a development from a previous spinoff that we also saw, so it all gets a little confusing because last year they spun off, let's see, MSNBC, CNBC, the Gulf Channel, all of these cable networks which were under the company Versant, and now they're doing it again, but with more of their media assets, why are they doing this? What is going on here? The uncharitable view, which Comcast would disagree with,

is that they tried to take a baby step, getting rid of those cable assets, and the market just didn't care. Because if you think about what the fast-growing businesses were 15 years ago, they were cable assets. When Comcast picked up NBCU from General Electric back in, I want to say, 2014, 2015, for around $30 billion, it was, by some accounts, the deal of a lifetime. It was one of the greatest Semenade deals ever struck,

because Comcast just knew how to run these businesses better than GE did. And for a long time, they were the engine behind Comcast's sort of meteoric certainly stock price growth. And as we know that that is stalled, Ed, you and I like to go on TV, but I don't think either of us would ever make our living going on TV because it's a declining business.

It just no one watches TV anymore. They tried to spend off first, and that obviously worked for a bit, right? But now they've taken this much more dramatic step. And it's seen in a lot of quarters, if you look at the stock price performance of charter, right, Comcast's chief broadband rival, it's seen in a lot of quarters

as a prelude to more M&A, NBCU buying or being bought. Comcast, similarly, is widely expected to go after charter communications, which itself is trying to buy or has bought Cox Communications. We are in what John Waldron told us was sort of an era of endgame consolidation where everyone is just buying everyone in an effort to get as big as possible before they're stopped by the next administration. Just looking at how these stocks have performed since the Baby Step spin-off, i.e. Versant Media, Comcast itself is down nearly 15% since that happened, and Versant is down nearly 25%. Now, my understanding was the idea is that

when you're sort of conglomeratized, you pay this, what we kind of call the conglomerate tax, which is all of the sexier properties get lumped in with the unsexy properties, and if you can separate those out, then maybe you get a more attractive multiple on one of the other stocks. The stocks have both gone down. So I guess my question is, why do they think this will work? Or are they just sort of crossing their fingers? It's a complicated question. So to go back to sort of the prototypical, the archetypal conglomerate, it was General Electric. And Jack Welch's argument and Jeff Imel, his successor's argument, was that the size and scope

of these business creates a smoothing effect. If, say, your engine manufacturing business isn't doing well, increased ad sales from an NBC universal make up for that gap. It allows what Jack Welch called predictable earnings, what some called earnings manipulation, but generally was seen as a more consistent, reliable producer of cash flow. But investors kind of realized in recent years they can do that themselves. They can build their own conglomerates using index funds, using any number of ETFs, where they didn't need a corporate back office to be architecting it.

That's generally the argument for why conglomerates have almost uniformly broken up. There are very few true historic conglomerates left. What's happening with Comcast is a little bit different. So to rewind the clock, broadband was seen as sort of the fastest growing backbone of a lot of these companies. If you recall, Time Warner Cable was a massive deal for Comcast. Comcast itself, Charter, Cox, Altice, all of these businesses took on a lot of debt to build out the fiber optics that actually power the internet that allows you and I to talk to each other from across Manhattan. And in doing so, they were making a bet that growth would continue to be sort of unflappable, right?

Everyone needs to be on the internet. more and more people want faster and faster internet. That was why you saw Comcast and Charters shares surge during the pandemic as obviously more and more people flocked to upgrade their internet speeds, to rely on the internet more. And then what changed was the mobile companies started to step in. So the AT&Ts, the Verizon's, but really the T-Mobiles, right? They really started to compete aggressively for home internet

using these 5G networks that, of course, are ubiquitous and we rely on for our phones. That led to slowing growth in what was the growth engine for Comcast after linear started to decline, the cable or the broadband business itself. And so earlier this year, Charter and then Comcast both warned that they were seeing slowing growth, outright declines in customer acquisition and revenue in their core engine. And investors just freaked out, right? The stock re-rated, I want to say double-digit drop for Charter and Comcasts in the course of a week. And so you have two businesses here that are fundamentally challenged right now. You obviously have the studio business, which will be significantly smaller than what they paid for NBCU by any by any

metric, but you also have a really challenged broadband business that is sort of fighting to keep and retain customers by any means possible. So, yes, while there is sort of a conglomerate tax that you pay and unstructuring that conglomerate should theoretically lead to a better multiple to multiple expansion, what's happened here is you can't really put lipstick on a pig when the pig is drowning in mud, and that's both of these businesses here. It's a really interesting point. I mean, you've got broadband, which you're saying is struggling. itself. You've got the cable channels, which are obviously struggling over at Versa. You've got some of the more traditional media production studios like Universal Pictures, Dreamworks, etc., which

I don't think people are feeling very bullish on. I mean, I don't think anyone's very, unless you're David Ellison. Peacock, maybe, but we also know that it's still losing money itself. I mean, Are there any assets in this business that Wall Street looks at and goes, I want a piece of that? Not the way that investors are looking at assets right now. We have gone from sort of a very conservative, shepherd your cash mentality coming out of the tech boom, into a, we are once again rewarding growth. And neither of these businesses are fast-growing or predictably growing businesses. Now, Comcast for years has said that profitability for Peacock is just around the corner.

that, of course, has not materialized. Mike Kavanaugh, the now co-CEO of Comcast, who will lead NBC Universal, the spinoff, again reiterated that on the call with investors earlier this week. It's really hard to make a streamer profitable. Basically nobody but Netflix has done it. Not Disney, not HBO. It's hard. It's very hard to compete here. What is the saving grace for Comcast, however, is that they've got two folks who are stepping into respective leadership roles at these positions who know the businesses really well. On the one hand, you have, as I just said, Mike Kavanaugh. who's co-seo of Comcast with Brian Roberts right now. This is a guy an inveterate banker, spent a little bit of Carla, maybe a year, but a longtime banker at JPMorgan and has been in and around Comcast for years, knows this business intimately well. Not a Hollywood guy, but a great finance guy.

And then you have Comcast former CFO, Mike Angelakis, who left in 2015 to run a Comcast-backed investment firm. He is coming back to run the broadband business. And for M&A practitioners and viewers, they will know him from the actual acquisition of NBC, He was the guy as Comcast CFO who kept it all together. He's widely respected.

He's seen as a steady operator. And with Brian Roberts having his hand in both of these businesses, there is actually a decent amount of long-term hope for both of these assets in as much as you can have hope in either of these troubled sectors. What is the future of these conglomerates, do you think? I think it was an interesting point that, you know, it used to be considered a good thing. Jack Welch kind of led the charge and then investors woke up one day and said,

hold on, I already own lots of different stocks. I don't need the operators to diversify. I can diversify myself. Are conglomerates on the way out? Yes and no. I mean, if you look at GE, right, broke up several years ago now and has created staggering multiples of value for shareholders. The three split companies are worth, I think, four or five times what GE was when they split. It's been remarkable. That being said, so that model of conglomerates, the industrial engine being the sort of the engine that allowed conglomerates to exist, that's dead. But as my colleague Liz Hoffman and I've written about a lot, AI companies are conglomerates by any other name. Google is a prototypical conglomerate.

Amazon is a conglomerate. I mean, they make anything from doorbell cameras to Wi-Fi routers to, you know, they're a logistics provider. They're obviously a huge tech company. These are conglomerates that have a new engine fueling them. That engine is, to a certain extent, web hosting, web services, but also AI now. And AI, arguably, if you look at InVideo, which has taken stakes in dozens of companies, large, large stakes, a Google, a Microsoft, all these companies are turning into holding vehicles. What's allowing them to do this, other than Google's case, which is still largely advertising, is being a hyperscaler, is being an AI compute provider.

That allows these companies to sort of become the new conglomerates and allow them to dabble in self-driving cars. Or, yes, run a media company. I mean, Google just cut a deal with 824. Amazon obviously is getting into sports and dipping at the same. home in news. There are new conglomerates around the corner, and investors just don't care. The expected upside from AI, which you, I, and many other people have questions about, but largely the street thinks is unlimited, allows them to sort of paper over the lower

multiple businesses that are really a few basis points compared to the massive amounts of money they're taking in. It does seem that this is just a natural part of the corporate life cycle, and I know you've written about this. You conglomeratize as you grow, and then suddenly you're... you wake up one day and you realize things aren't the way they were, and then you deconglomeratize, and of course, this is the old adage of bundling and unbundling,

the only two things that really happen in business. And it is sort of happening right before our eyes. I think you make a very good point. Rohan Goswami is business reporter at Semphor. Rohan, thank you so much. Ed, always a pleasure. Thanks for having me. The president has a new strategy to get gas prices,

to come down. Tell them to. Yes, earlier this week on Truth Social, Trump demanded gas retailers to, quote, get their prices down immediately as they are, quote, too high. No shit. This is probably the lowest of the low when it comes to economic policy. You break something, in this case, global oil supply, and then instead of cleaning up your own mess, you go out and blame other people for doing it, in this case, gas companies. But let's be very clear. The reason gas prices are high is because of Trump and the mess he made in Iran.

And despite his attempts to convince us that the problem is now solved via this memorandum of understanding, the reality on the ground is quite clear, it is still a fucking mess. The US and Iran both traded strikes at each other over the weekend. And if you're wondering if that memorand,

if that Memorandum of Understanding still holds, well, look no further than the US and Iranian governments, both of which have accused each other of violating the memorandum. Now, supposedly, these strikes have been halted, and supposedly the straight is back in business, but a boy can only cry wolf so many times. The only way to bring inflation back down, including gas prices,

is to actually resolve the conflict in Iran. Until you do that, prices won't fall, and they certainly won't fall if you simply tell them to. Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Chalon, Isabella Kinsal, Kristen Nudanahu and Mia Silverio, and our social producer is Jake McPherson. Thank you for listening to Property Markets from Proftery Media. If you liked what you heard, give us a follow. I'm Ed Elson. I'll see you tomorrow.