We might have seen the peak of the semiconductor stock market for quite a while. On Wednesday evening, chip investors were on top of the world. Industry heavyweight Nvidia (NASDAQ:NVDA) reported tremendous earnings, with its shares topping $500 for the first time. Many other semiconductor stocks surged in sympathy.
A day later, however, the sentiment flipped on a dime. The Nasdaq Index careened more than 250 points lower in one of its swiftest selloffs of the year. Semiconductor stocks were slammed, with the benchmark VanEck Semiconductor ETF (NYSEARCA:SMH) tumbling more than 2.5% on the day.
Why did traders decide it was a good day to sell semiconductor stocks? It seemed like a classic buy the rumor, sell the news scenario. After all, Nvidia absolutely delivered the goods in its earnings report, and yet the stock closed Thursday’s trading essentially flat on the day. If even Nvidia couldn’t rise on its own blockbuster results, it’s time to look out below on these three worst semiconductor stocks.
Advanced Micro Devices (AMD)
What if you had the same AI-related hype cycle as Nvidia but didn’t have the actual earnings results to back it up? Well then, you’d have Advanced Micro Devices (NASDAQ:AMD).
AMD released an utter stinker of a quarter earlier in August. Its revenues dropped 18%, gross profit fell 19%. Meanwhile, net income plunged an eye-watering 94%. AMD, which has a market cap of more than $170 billion, earned a grand total of $27 million in net income in Q2.
AMD’s management tried to put a positive spin on things by suggesting that there would near-term upside from AI-related chip demand. However, not all analysts were buying it. Bernstein‘s Stacy Rasgon called out AMD for a lack of specifics or data to back up its AI-related growth projections. Rasgon believes AMD’s earnings estimates are too high and left a mere $95 price target on the stock.
And Nvidia’s quarterly results back up that view. Nvidia is already cashing in on the historic boom on chip demand thanks to AI. In the same quarter that Nvidia saw a windfall, AMD’s revenues plunged 18%. AMD simply isn’t in the same ballpark right now. And with the company barely profitable whatsoever amid its slumping results, AMD stock is set for a powerful decline.
Marvell Technology (MRVL)
Marvell Technology (NASDAQ:MRVL) is another company whose CEO has leaned heavily into the generative AI story. According to CEO Matt Murphy, generative AI is driving new investment by the firm’s cloud customers.
Not surprisingly, MRVL stock ran up earlier this summer on hopes of it becoming the next big AI stock winner. And yet, actual results continue to underwhelm.
To that point, the company reported earnings on August 24th. The company lost money outright and its revenues slipped 11% year-over-year. The purported AI revolution appears to be passing Marvell right on by. With poor earnings and fading AI enthusiasm, MRVL stock is set to tumble.
Enphase Energy (ENPH)
Enphase Energy (NASDAQ:ENPH) designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry. It offers semiconductor-based microinverters and associated software and support services to manage the generation and storage of solar power.
Enphase enjoyed an historic run-up in share price over the past few years, culminating in the Inflation Reduction Act which offered large subsidies for the American solar industry.
However, the wheels have now come off for ENPH stock. Shares are down from a peak of more than $300 per share to just $122 now. Shares hit fresh 52-week lows Thursday.
There is plenty more room to fall. After all, Enphase stock sold for just $30/share prior to the pandemic. It might end up slumping back to near that price once again.
Even after the recent share price crash, Enphase is still selling for more than 30 times trailing earnings. That’s not cheap. Analysts had been modeling massive earnings growth going forward, but recent results have cast grave doubt on those lofty projections. And with the flood of green energy stimulus from the government coming to a halt, there’s a decent chance Enphase’s earnings drop outright from here, putting more pressure on an already overvalued stock.
On the date of publication, Ian Bezek did not have (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.
