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Do Newly Built Skyscrapers Signal The Top of the Stock Market?

Published

7 years ago

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Have you heard of the Burj Khalifa in Dubai?

It’s the tallest skyscraper in the world at 828m (2,717 ft), and it was completed in 2009. The price tag was a whopping $1.5 billion, making it one of the most expensive buildings of all time.

For these bold projects to get the go ahead, global financial conditions have to be just right. Record-breaking skyscrapers can take multiple years to build, and things can change drastically from start to finish.

In this case, construction of the Burj Khalifa started in 2004. By the time it was completed, however, the financial markets were in ruins. Lehman had collapsed, and rescue efforts such as TARP and QE were in full force to try and stop the bleeding. Between October 2007 and March 2009, the Dow Jones Industrial Average lost 55% of value.

The crisis didn’t only bankrupt financial markets – it also took its toll on competing projects that aimed to unseat the Burj Khalifa as the world’s height record-holder. For example, One Dubai Tower A was supposed to be a whopping 1,008m (3,307 ft) tall – but it was shelved in March 2009 once it was clear that global financial conditions would not be improving any time soon.

Do Newly Built Skyscrapers Signal The Top of the Stock Market?

Could record-setting skyscrapers signal economic over-expansion and a misallocation of capital?

EWM Interactive, a subscription service focused on technical analysis, thinks so. The following infographic follows the “Skyscraper Curse” through six different market tops and subsequent crashes over the past century.

It is gigantic in size, so please click here or the below image to access the legible version:

The Skyscraper Curse

EWM Interactive sums up the infographic with these words:

In the market, extreme optimism results in price bubbles. One of the real-life manifestations of extremely positive social mood is the construction of enormous buildings. Market tops and skyscrapers often seem to emerge simultaneously, because both phenomena are the result of the illusion of infinite prosperity. But extreme psychological conditions do not last very long. That is the reason why record-breaking buildings, whose construction starts during a market bubble, are often completed after the bubble’s collapse.

That said, there are counter-examples that show the “skyscraper theory” is not perfect.

The recession after World War I, the recession of 1937, and the recession in the early 1980s were not correlated with any record-breaking skyscraper projects. An empirical test in 2015 that looked at the theory found that record-setting skyscrapers did not correspond directly with the business cycle.

Let’s hope that they are right, since the Jeddah Tower – a 1,008m (3,307 ft) monster in Saudi Arabia – is expected to unseat the Burj Khalifa as the world’s tallest building by the year 2019.

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Technology

Ranked: America’s Largest Semiconductor Companies

This graphic visualizes the market capitalizations of America’s 15 largest semiconductor companies.

Published

10 mins ago

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June 5, 2023

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Ranking America’s Largest Semiconductor Companies

As our world moves further into an era of widespread digitization, few industries can be considered as important as semiconductors.

These components are found in almost everything we use on a daily basis, and the ability to produce them domestically has become a topic of national security. For example, in 2022 the Biden administration announced the CHIPS and Science Act, which aims to strengthen America’s position in everything from clean energy to artificial intelligence.

With this in mind, we’ve ranked the top 15 U.S. semiconductor companies by their market capitalizations.

Data and Highlights

The data we used to create this infographic is listed in the table below. Year-to-date (YTD) returns were included for additional context. Both metrics are as of May 30, 2023.

RankCompanyTickerMarket Cap (USD billions)YTD Return
1NvidiaNVDA$992180.2%
2BroadcomAVGO$33545.1%
3AMDAMD$20295.7%
4Texas InstrumentsTXN$1608.2%
5QualcommQCOM$1298.2%
6IntelINTC$12512.2%
7Applied MaterialsAMAT$11541.2%
8Analog DevicesADI$899.2%
9Lam ResearchLRCX$8552.1%
10Micron TechnologyMU$7842.3%
11SnyopsysSNPS$7145.4%
12KLAKLAC$6321.8%
13Marvell Technology GroupMRVL$5476.2%
14Microchip TechnologyMCHP$4211.2%
15ON SemiconductorON$3636.3%

At the top is Nvidia, which became America’s newest $1 trillion company on Tuesday, May 30th. Shares pulled back slightly over the day and Nvidia closed at $992 billion. Over the past decade, Nvidia has transformed from a gaming-focused graphics card producer to a global leader in AI and data center chips.

In third and sixth place are two of America’s most well known chipmakers, AMD and Intel. These longtime rivals are moving in opposite trajectories, with AMD shares climbing 770% over the past five years, and Intel shares falling 47%. One reason for this is the data center segment, in which AMD appears to be stealing market share from Intel.

Further down the list we see Applied Materials in seventh, and Lam Research in ninth. Both firms specialize in semiconductor manufacturing equipment and thus play an important role in the industry’s supply chain.

Trade War Impacts

As tensions between the U.S. and China escalate, chipmakers are becoming increasingly entangled in geopolitical conflict.

In October 2022, the Biden administration introduced new export controls aimed at blocking China’s access to semiconductors produced with U.S. equipment. This impacted several companies in our top 15 list, including Lam Research and Applied Materials.

Shortly after the export controls were announced, Lam Research said it expected to lose upwards of $2.5 billion in annual revenues.

We lost some very profitable customers in the China region, and that’s going to persist, obviously.
– Doug Bettinger, CFO, Lam Research

In response, China announced in May 2023 that it would no longer allow America’s largest memory chipmaker, Micron, to sell its products to “critical national infrastructure operators”.

This is not the first time Micron has been involved in a controversy with China. In 2018, the firm alleged that Fujian Jinhua Integrated Circuit, a Chinese state-owned company, had solicited a Micron employee to steal specifications for memory chips. The U.S. Department of Commerce imposed export restrictions on Fujian Jinhua as a result.

Chipmakers on both sides of the Pacific will be closely watching as competition between these two countries heats up.

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