Galaxy Securities research: The Fed hiked 25bp to 3.75%–4.00% on Sept. 16, the
first increase since July 2023, lifting the systemic center of the risk-free
rate beyond the policy rate. Higher discount rates compress equity multiples,
hitting long-duration, high-valuation growth names most. The AI narrative
remains robust, but pricing is shifting from long-term visions to near-term
delivery and earnings verification. On the first trading day after the hike,
compute-related sectors—storage, CPUs, foundries and optical
interconnect—generally outperformed, driven by strong current profits and short
payback periods that make them less rate-sensitive. Divergence continues:
compute hardware with validated cash flows and earnings (advanced process nodes,
memory, optical interconnect, equipment and materials) are benefiting as
downside is largely priced in, while names reliant on distant narratives without
earnings support are being de-rated. AI is entering a rational verification
phase.
