A Market That Has Definitely Changed: You Must Choose and Hold Well
A Definitely Changed Market, You Must Choose and Hold Well | Chesley Investment Advisory Vice President Choi Il-ho [Chesley Official Membership / 26.08.11.Tue]
Speakers
Choi Ho
— Vice President
Summary
Choi Ho reviews US-centered portfolio strategy after the July volatility shock and argues the market has normalized but now requires sector-level fine-tuning. He is cautious on memory as DRAM/NAND price momentum decelerates, while turning more constructive on M7/big tech as capex peaks and cash flow troughs. He also highlights AI bottleneck rotation toward networking/optics, power, and robotics, plus a longer-term shift toward companies that use AI efficiently.
- Major US ETF drawdowns show software down 12.8%, M7 down 2.5%, memory semiconductors down 17.1% and data centers down 12.8%.
- Memory leaders such as Samsung Electronics, SK hynix, Micron and SanDisk face decelerating DRAM/NAND price momentum from Q3 into Q4.
- Micron's gross margin is near 86% and forward growth is slowing, making further stock momentum harder.
- M7 heavy capex is peaking and cash flow should trough around 2027, potentially allowing stocks to bottom earlier.
- AI adoption data show high usage in IT, professional services, education and financials; future winners may be efficient AI users, not just AI makers.
- AI bottleneck stages favor networking/optics next, then power infrastructure, then physical AI/robotics.
- The speaker recommends fine-tuning: reduce peak-passing sectors, add trough-passing sectors, and be selective in oversold names.
Ideas
Memory price momentum is decelerating sharply.
Memory semiconductor leaders such as Samsung Electronics, SK hynix, Micron and SanDisk led the market, but Morgan Stanley estimates show DRAM/NAND quarter-over-quarter price gains slowing from 16%/13% in Q3 to 6%/3% in Q4. Because stocks trade on the rate of change, memory price momentum, profit improvement momentum and stock momentum should decelerate even if absolute profitability remains good. The recent drop was amplified by leverage and credit, so the speaker says investors should keep the decelerating momentum in mind and reduce sectors passing their peak.
Software stocks may lead rotation.
As memory momentum decelerates, the speaker sees room for rotation into previously neglected big tech and software. Software stocks that recently reported good earnings are rebounding, though it is still unclear which software names will lead for the rest of the year.
M7 cash flow trough precedes rebound.
M7 companies invested heavily in capex, which depressed cash flow. The speaker views this as a peak-capex, trough-cash-flow setup, with cash flow likely troughing around 2027. Since stock prices lead fundamentals, M7 stocks could bottom and rebound several quarters before the cash-flow trough, making them candidates for adding exposure as other sectors pass their peak.
US market recovery extends into year-end.
The speaker believes the July fear-driven market has normalized and is returning to a more normal regime. He says investors who correctly adjust to sector inflections can recover losses during the remaining August through November period, supporting a broader US equity recovery into year-end.
