TMTB Morning Wrap
Good morning. Futures +10bps slightly up as we close out what has been a very fun and record-breaking quarter. Some stats on Q2 via GS: Nasdaq will finish Q2 +25%, its best quarter since Q2 2020 (and 2nd best since Q4 of 2001). Semis +80%, its best quarter on record (going back to ‘94). I’m looking forward to what the 2H has in store for us.
This morning, Semis leading us higher +50bps led by SNDK +3% (positive note by Bernstein) and continued strength in semi-cap (+40% in June alone). Software -50bps lagging.
Asia generally green: TPX +0.32%, NKY +0.86%, Hang Seng -0.63%, HSCEI -0.62%, SHCOMP +0.5%, Shenzhen +2.08%, Taiwan TAIEX +2.5%, Korea KOSPI +0.97%. Memory names up 1-2%.
Relatively slow summer day news wise on this shortened week. Let’s get to it…
SNDK: Bernstein Raises PT to $3,000, Arguing New LTAs Fundamentally Improve Earnings Durability
Bernstein believes investors are underestimating how these contracts improve pricing stability and support higher valuation multiples, raising its SNDK PT to $3,000 and increasing FY27/FY28 EPS estimates. Bernstein’s downside analysis suggests that even under a severe downturn—with ASPs falling 72% peak-to-trough and customers walking away from contracts—FY30 EPS would still be ~$214 versus ~$81 without LTAs. They increase FY27 and FY28 EPS to $243 and $272 respectively in their base case, and $350 and $400 in their bull case.
GOOGL: Morgan Stanley Raises Estimates on AI Capacity Expansion and TPU Monetization
Morgan Stanley raised its PT to $415, arguing investors are underestimating Google’s AI infrastructure earnings power as compute capacity scales. The firm now expects Google to add 9GW of compute capacity in 2028, including ~7GW of TPUs, while selling ~4GW of merchant TPUs, implying roughly $80B of TPU revenue and driving Google Cloud revenue to ~$308B in 2028. Morgan Stanley also raised its 2027 capex forecast to $350B (from $300B) to support the larger AI buildout, while forecasting Google Cloud grows 106%/44% in 2027/28 and contributes ~$132B of EBIT by 2028.