Chip stocks are in focus amid today’s brutal pullback. A number of major semiconductor makers are in the red today as recession concerns eat away at many high-growth industries.
As the S&P 500 and the Dow 30 eye losses of more than 2%, some investors are watching chip stocks for signs of a selloff. Companies like Intel (NASDAQ:INTC), Advanced Micro Devices (NASDAQ:AMD) and Qualcomm (NASDAQ:QCOM) are slumping about 2% at the time of writing. It seems concerns over the value of semiconductors is hurting many chipmakers today.
From the highs of 2021, semiconductors have seen their prices plummet this year. The Philadelphia Stock Exchange Semiconductor Index is down more than 2% so far today, on pace for its sixth-consecutive losing trading session. In fact, chips are the single worst-performing sector so far this year, according to Bloomberg. The Semiconductor Index has shed more than 35% of its value year-to-date.
Chips have seen a monumental reversal from last year’s high, even despite a global supply shortage. It seems the tightening monetary environment has resulted in bearish uncertainty toward the high-growth industry.
Chip Stocks Sink as Consumers Shy Away From Tech
Demand for smartphones and computers reached a sort of fever pitch during the Covid-19-induced quarantine. As millions went inside, demand for new, faster hardware became an apparent bullish force for chipmakers around the world. Companies like Nvidia (NASDAQ:NVDA) saw their share prices skyrocket as chip demand and a global semiconductor shortage created the perfect storm.
Unfortunately, this year has spelled trouble for the prospering industry. As consumers feel the weight of rampant inflation and rising interest rates, demand for luxury tech products is down. It is a particularly brutal reversal, given the efforts tech companies have taken to bolster their semiconductor stockpiles.
“We believe it will take one-two quarters for the smartphone and PC customers to burn off the excess inventory before starting a rebuild,” said Needham analysts last week. Additionally, Taiwan Semiconductor (NYSE:TSM), the largest contract chipmaker by volume, has reportedly seen some of its largest clients cancel orders through the rest of the year, according to the Digitimes last Friday.
Whether or not chip companies will manage to regain last year’s red-hot momentum remains to be seen.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
