Publication date: 27-5-2026
What I saw this week in the AEX, in the chip sector, and what it tells us about the direction for the period ahead.
It was a week of recovery. Based on good news about the war in Iran, we saw a strong recovery in the AEX. Within our methodology, this was not so surprising: we calculated much higher price targets for the year 2026. When exactly those price targets will be reached, we obviously do not know, but the confidence that it will happen makes it a little easier to remain calm in the event of large declines, such as in March.
Based on past history, the probability of achieving our price targets is above 80 percent. Statistics, no guarantee, and there's no time frame, but it's something to keep in mind during big declines.
Still warning signals
But contrarian thinking is also part of our job. What is highly overvalued right now? A lot around A.I., memory storage and chips. In the Netherlands, ASML, ASMI and BESI are largely behind the good performance of the AEX. That's no comparison to the Dax in Germany or the CAC 40 in France. Those are hardly positive for the year. So never make the mistake of simply comparing our own index to those of larger European countries.
Is ASML overvalued? Our algorithm thinks so; analysts worldwide still give ASML 5 percent upside room. ASMI? Our algorithm says: overvalued; analysts see fair value. BE Semiconductor? Our algorithm says: overvalued, analysts agree and now see the company 7 percent above fair value.
And Nvidia, the leading company in the sector, came out with brilliant numbers this week, including the dividend increases we like to see. Yet Nvidia went down this week and cyclically appears to be sending a top signal in the form of a '13' on the weekly chart. The '13' is a figure we prefer not to see reached in our systems when trying to 'count out' a trend, and in the weekly chart it gives a long-term signal.
With Nvidia itself, by the way, we still see plenty of opportunities: declines still seem buyable here, and there is no overvaluation, even according to our algorithm. Possibly it means that this kind of global market leader may be temporarily weaker on the market, but will eventually carry the stock markets again.
The cycle of chip companies
Traditionally, all forms of chip companies were highly cyclical: huge increases when demand rose and supply was too low, and conversely, huge declines the moment too much production capacity arose and demand fell. The latter will not happen so soon with the current industrial A.I. revolution, but all experienced investors know that with semiconductors they always have to be extra careful not to get caught in the usual heavy price declines.
Meanwhile, the software sector has gone through something we cannot call anything other than a crash. The indices are at break-even (the Dax) or higher (the AEX, the S&P 500), but "quiet" investors who were in Wolters Kluwer or in Intuit have seen their portfolios crash, at a time when stock markets are generally doing well.
What is going on with Wolters Kluwer? Nothing, it seems. There is nothing unusual about its earnings figures. Intuit, which licenses accounting software, went down another 20 percent after figures, even though its stock market value had already crashed.
The week in figures
Our recommendation at this time
It has never been clearer to retail investors that they simply must own index ETFs than it is now. If you own an AEX ETF or an S&P 500 ETF, you haven't noticed the crash that many companies are going through right now, because it is offset by the value explosion of A.I. companies, and they are all in the same index. As a result, the average remains in order.
It is also conceivable that the indices will remain reasonable when the hyped sectors enter the downward part of the cycle. This is because then the huge undervaluation will run out of many other companies, and so a reasonable balance will remain.
Outlook
For this week, our established system received a long indicator at the beginning of the week. For the rest of the week, we kept an eye on whether another short signal emerged, but it did not. It remained at one position for the week.
Have a good weekend and see you at the review at the end of next week.
On behalf of Van Megen Systematic Trading, Ruud van Megen.
