The market has been extremely impulsive this year. It voted on a bunch of semi-conductor stocks that would benefit from the AI revolution, from Sivers semiconductors, to Soitec, pushing share prices to their limits.
What followed, was akin to the market’s secondary function “weighing”- as many of these companies posted stellar earnings, only to be met with a tanking share price, from what I like to attribute to investors taking profits on companies trading at valuations that no amount of stellar performance could make sense of.
Investing is simple, but not easy. When you see screenshots of X accounts up 3541% YTD, you start to wonder if your strategy might need an update. When you dive a bit deeper to discover those accounts are essentially the lucky few who took a 1 factor bet on a few hype names it reminds you to stick to your strategy- you’re in this for the long run.
For every X account up a thousand percent year to date, there are plenty who wiped out their accounts. You don’t see them posting, because they’re busy nursing real wounds.
The bull-case for AI is not over, far from it, but it does not mean an AI exposed company trading at 30X sales is a good investment. Good business? Sure. A good investment needs to have a valuation that makes sense.
Soitec (156%)
Earnings:
The earnings picture was stellar. The thesis played out beautifully and quickly, and the market re-rated the company to what I believe is a fair value for now.
The market is keenly focused on the photonics story. The company is delivering: “Photonics-SOI sales doubling year-on-year.”
What I struggle to understand is whether or not Soitec will benefit from true bottleneck-like economics: if they are able to increase prices to take advantage of excess demand. It is possible, but I cannot get a good read on it, it’s beyond my pay-grade, and with every single analyst watching Soitec like a hawk now, the edge of it being “undercover” is lost.
How The News Effects the Thesis:
No matter which way I model it, even under my bullish assumptions, it still looks fairly valued to expensive at 122EUR per share which puts FY27 EV/EBITDA of 20X.
That being said- the real ramp up for photonics is still set for 2027, onwards, but as I said before, I cannot get comfortable modelling that.
I do personally believe that the stock will continue performing well into 2027, 2028, and 2029. I would just like a better entry price after locking in a 100%+ gain.
I was greedily eyeing Soitec as it fell from its high of 192 EUR. I wanted to buy in the 70s, but alas the company reported earnings and the stock flew again.
I believe Soitec will continue to do well into the future, I also believe that management will continue to sandbag earnings because photonics will continue to surprise both them, and the market.
My Position:
I hold no position now.
I cannot buy Soitec at current prices because I cannot properly model the TAM to a degree where I feel comfortable with its current valuation. When I originally pitched Soitec it traded at 51 EUR. It now sits at 120 EUR. I sold out most of my Soitec around 110 EUR before it went to 192 EUR.
Argosy Research (-14%)
Earnings:
Revenue down, the earnings didn’t collapse with it, but the growth I have been expecting has not arrived yet.
A brief reminder of the original thesis: I expected LONG-DIMM, Type-C, and Micro-stamping which all accounted for 30% of the revenue to grow much faster than the lower margin legacy SO-DIMM.
Management explicitly guided for shipments of LONG-DIMM to double, with demand coming from Meta and Google. It did not happen- LONG-DIMM actually fell by 1%.
However, in the May investor call they mentioned that this growth is expected to be concentrated in the second half of the year, and this is why I think it is too soon to say whether or not the thesis has played out.
Instead we had Metal Bar growing 13% QoQ - this is also higher margin business, and growing 47% YoY now at 12% of total revenue.
Inside “Others” we have CAMM2- LPDDR5, and CABB connectors for AI PCs and workstations. “Others” is growing extremely fast, and if we get qualification in CAMM2 and CABB might become its own revenue segment line.
M2 remained stable. SO-DIMM, as expected in our thesis, dropped significantly, but net profit remained stable for the company.
I am still waiting for the Q&A transcript to be published online. Especially interested to see what management says regarding the “double shipments” from LONG-DIMM- whether that’s expected to all be in H2.
How The News Affects the Thesis:
Mixed play on the thesis.
1- The revenue mix is changing towards higher margin, higher quality products. Confirms part of the thesis
2- Long-DIMM growth? Possibly weighted towards H2. This will be validated or invalidated either in the Q&A that I am still waiting for, or from next results.
I will update this writeup as well as the Substack chat regarding the Q&A when it arrives.
My position:
Holding the position for now. It was a full position on entry. No changes made. I want to see the Q&A on Long-DIMM. Would be nice if its just weighted towards H2.
Dividend yield at ~6%.
EV/EBITDA at ~8X with lots of growth optionality in its new products keeps me interested.
GnCenergy (+38%)
How many times do I need to learn this lesson?
News Update:
GnCenergy up 42% since my pitch- but it was not one for weak hands (me) because it first dipped 45% before going on a massive tear.
I obviously don’t have a problem finding winners, I have a temperament problem. I should stop looking at my portfolio. I sold because I got scared, took a small loss.
The six recent deals they got total KRW245.36bn. That equals approximately 93.4% of GnCenergy’s entire 2025 revenue of KRW262.63bn.
- KT / SGC AI Infra Gunsan: KRW75.51bn, through December 2027.
- LG Uplus Paju Center Phase 2: KRW38.16bn, through March 2028.
- National AI Computing Center / Samsung C&T: KRW35.96bn, through October 2028.
- Yongin Deokseong AI data centre / Samsung C&T: KRW33.18bn, through March 2028.
- KINX Siheung gas-turbine generators: KRW32.81bn, through March 2029.
- Samsung SDS Gumi AI data centre: KRW29.75bn, through May 2029.
How The News Effects the Thesis:
GnCenergy is experiencing exactly the kind of demand I was expecting from the datacenter buildout in Korea. What is left to be determined regarding my original thesis, is whether or not these projects convert into higher margin revenue vs previous projects.
My Position:
I chickened out of this position for a small loss.
In future I will be putting price targets on all my pitches- these targets will be based on where I believe the company is fairly valued, and should act as decent targets for where positions should be sold. (Not advice, but my personal targets of fair value).
JCU Corporation (+31.1%)
Earnings:
Recent earnings support the base thesis, not the bull case (AI Ramp).
- Revenue: ¥7.49bn, up 6.5%.
- Operating profit: ¥2.74bn, down 2.3%.
- Net profit: ¥2.08bn, up 2.5%.
- Chemicals: Revenue rose 18.2%, driven by via-filling chemicals (+21.5%) and etching chemicals (+40.1%). (YoY growth)
What bothers me about JCU’s results is that we have not seen a further substantial increase in Via Filling, but at the same time we saw their closest peer, C. Uyemura, eak out a QoQ gain in their chemicals segment.
This latest quarter is historically seasonal, so the Q4- Q1 decline is not new to the business, but Taiwan chemical sales fell ~11% QoQ.
We already know that the majority of JCUs via filling revenue comes from high-end smartphone PCBs, hence the high margin.
The AI-Ramp bull-case thesis assumes that datacenter PCBs become a bigger part of revenue. We are not seeing this with current results, while we are seeing it play out with C. Uyemura.
The apparent margin deterioration was substantially caused by Kumamoto depreciation: D&A rose from ¥223m to ¥572m, so the margin detoriation is not structural in my opinion.
How The Earnings Affects the Thesis:
The core of the bull thesis for JCU was that they would experience a ramp-up in high margin revene by selling more CU-BRITE. This would in turn shift their revenue from majority high-end Smartphone PCBs to high-end PCBs used in AI Chips.
We had confirmation of this when I first pitched the company- Via Fill revenue from Taiwan was increasing substantially.
This could mean a few things:
Capacity still qualifying (with my original estimates that we see the ramp in 2027).
New generation substrates haven’t entered JCU’s numbers yet.
JCU is not selling more chemicals to AI-related customers.
Competitors are taking the share.
Peers in the chemical space have all been growing QoQ, MKS, Element Solutions, Qnity. This is uncomfortable because where is JCU’s growth?
I am willing to wait until November results because JCU’s overseas subsidaries report to JCU with a revenue lag. This most recent results from Taiwan is what happened from January to March 2026, not from April to June.
C. Uyemura also reported a slight revenue increase- and they too have a similar accounting lag for overseas subsidiaries.
So if we look at the other competitors, we might be comparing the wrong financials.
My Position:
In my last positions update I mentioned closing most of my position in JCU, the reason was two-fold:
JCU had become and uncomfortably big position relative to the rest of my portfolio. The stock hit a high of 8000Yen, 100% up from my pitch, it blew past my target.
The market has been shooting first and asking questions later- by buying up any name that had an AI-Exposure label attached. The thesis wasn’t validated yet, but the market had decided to re-rate JCU to my fair value. When the market re-rates a company to your fair value, before your thesis is validated, you want to take profit.
My leftover position has now been reduced to ~5% in the sell off. I intend to hold this until the next results. At that point, if JCUs Chemical business (mainly Taiwan) has not grown in-line with other chemical names, the thesis would look invalidated.
The AI-bull case would be invalidated. But the company currently trading at around ~8X EV/EBITDA is not demanding at all. My base case still has JCU trading at around 6,600yen.
Nippon Chemical (-7%)
Earnings:
Earnings were fine, management is guiding for a 50% increase in Profit, but this is largely due to offloading of cross-holdings rather than a material increase in profitability of the operating business.
The company continues to offload cross-holdings. Using the proceeds to increase capacity for High-Purity Red Phosphorus which are scheduled for production in fiscal 2027- which is 2026- this year, they have a weird fiscal year.
Electronic materials results were muddied again with an automotive decline. The company mentioned that the “Level of demand, particularly related to AI servers, is exceeding expectations.” they are also possibly expanding Barium Titanate Capacity.
How The Earnings Affects the Thesis:
As with JCU Corp, and many other pitches, like Worldex, Shin Etsu, we will only really see the AI-bull case thesis play out from 2027 onwards, as the demand ramps up from their customers who are increasing capacity.
This earnings update has been fruitful because I have realized that my portfolio is far too overweight into different companies that reflect one-factor bet- a bet that demand appears later, in 2027 onwards, for mostly cyclicals.
But do I really need so much exposure to different variants of the same thing? From a portfolio standpoint, the answer is no. I should be more diversified.
While these earnings do not validate or invalidate my thesis, I need to re-assess my entire portfolio, and decide just how much exposure I want to these single factors.
My Position:
I am probably going to sell off my Nippon Chemicals position in its entireity. Not because the stock is expensive, or because I am unhappy with the results, but because I am too concentrated in chemicals, and need to decide what to keep and how much to keep, whether its JCU, Shin Etsu, or other cyclicals.
I do still want exposure to the capacity expansion bet, but it cannot make up such a large portion of my portfolio.
I will continue following Nippon, because I want to catch any signs of when the capacity thesis takes root, so I will keep you updated.
On this note- I will also be making the spreadsheet so that you can follow my changes live. With price targets, and cost-basis.
Update on:
Shin Etsu (+12.6%)
RS Technologies (+84.5%)
Worldex (+4%)
To come out in Earnings Update Part 2.