Goldman Sachs Delta One trading desk: US semiconductor valuations have fallen to multi-year lows. 2027 may be the top of the cycle

The Zhitong Finance App learned that the Goldman Sachs Delta One trading desk warned that anxiety surrounding capital expenditure was “extremely high” and that the valuation of the semiconductor sector had fallen to a level not seen for many years. The Philadelphia Semiconductor Index currently has a forward price-earnings ratio of about 12.16 times, close to the 2022 low; Nvidia (NVDA.US) is 10 times, the lowest multiple since 2013.

The trading desk indicated that the market may be sending a signal: “Profit expectations are at significant risk. 2027 is likely to be at the top because capital costs and the ability to finance expansion limit the speed at which companies can move forward.”

Analysts compare this to the tech boom of the late 1990s, warning “build capacity before demand is sufficient.”

Despite these concerns, the Goldman Sachs Delta One trading desk is still optimistic, believing that “application scenarios are still largely undeveloped” and that “robots have only just started, and enterprise IT workflow automation has not yet been rolled out on a large scale on traditional systems.”

However, the trading desk also acknowledged that “the capacity of a company's balance sheet and the limitations of the debt market are real and binding.”