SONY is a classic value play with a call option on AI chips still underappreciated by the market

SONY stock is bullish for several reasons. Given the news yesterday that SONY is developing a $6.4B AI chip JV with TSMC, here is why SONY is a classic value play with an AI chip call option still underappreciated by the market. SONY stock reached all-time-high $30 a share last November, then got hit hard by memory chip shortage on its gaming business, bringing it down to $20 (the bottom) on a temporary supply shock. Now that memory chip stocks are coming back to earth, SONY is on the rise again over the last month, with 50% appreciation potential just getting back to November ATH once memory chip shortage clears up in 2027 (and GTA 6 launches, which is almost a SONY exclusive given it's not launching on PC or Nintendo). Consensus Wall St analysts still have SONY stock priced in $30-$35 range. Stock sold off hard because retail saw memory shortage headline and feared the worse for PlayStation.

In terms of fundamental analysis, several things really exciting about Sony:

1. Sony under new CEO Totoki has been spinning off legacy low growth segments such as consumer TV and financial services (life insurance in Japan), these historically added a significant conglomerate discount on Sony stock, splitting SONY as an entertainment, chip, consumer electronics, and financial services company. Now, however, SONY is essentially just an entertainment and chip company, the two sexiest segments that are much higher growth and simpler in structure.
2. Massive competitive landscape improvements. In early 2022, Xbox announced the acquisition of Activision, and everyone thought Xbox was going to make Activision games exclusive. 4 years later, the EXACT OPPOSITE happened, Xbox couldn’t make back the massive $70B price tag of Activision (PS5 outsold Xbox Series at staggering 5:1 ratio), and now Xbox has made not only Activision games multi-platform on PS5, but also Bethesda and even its core Xbox studios games. Turns out in the history of video games that the Xbox Activision acquisition was a massive BOON for Sony, because it forever destroyed its top competitor Xbox as a walled garden console exclusive, so now essentially all Xbox games are also on PS5.
3. Development of AI since 2022. Generative AI is the first stage of AI, while Physical AI is the next stage of AI (NVIDIA and Tesla both betting their companies future on Physical AI). Sony is the #1 player in Physical AI chips. It just signed a massive new JV with TSMC to make such Physical AI chips. Sony’s chip business just doubled its operating income last quarter, and is now Sony’s SECOND LARGEST segment, right after gaming, and is by far the fastest growing segment. Sony is just now starting to capitalize on AI, and the market is still far from pricing in its AI chip value.

For a helpful explainer video of Sony’s AI chip business, you can search ‘Sony chip stock investor’ on YouTube.

Therefore, fundamentally, SONY is up for a massive rebound when memory shortage clears (it already has been, just look at recent cratering of memory chip stocks), market is just now starting to re-price this shortage as a temporary supply shock that's clearing up now. While SONY also holds a massive call option on physical AI chips, where it is the world's #1 player in (that's why TSMC picked SONY as JV partner).

Also doesn't hurt that SONY's Spider-Man Brand New Day is now the 12th highest earning move OF ALL TIME after less than 2 weeks, and is on track to become a top 3 highest earning movie of all time.