Semiconductors are the lifeline of the modern digital age. They help our smartphones, laptops and cars to function properly. Moreover, the rise of generative artificial intelligence (AI) has made semiconductors even more critical to the invention of new technologies.
Software programmers train new generative AIs with complex large language models, and this process requires an immense amount of computing power. Chipmakers like Nvidia (NASDAQ:NVDA) and networking server chip developer Broadcom (NASDAQ:AVGO) have benefitted handsomely from the ongoing “craze” over AI.
Unfortunately, investor fatigue over the whole phenomenon may be settling in. The Nasdaq 100 lost $1 trillion in value last week as bets on Big Tech AI stocks began to sour. Investors have little clue on when some of these big-dollar investments in AI features will pay off, and with many technology firms trading at frothy valuation multiples, for some investors it’s been hard to justify buying up more of their shares.
Below are three semiconductor stocks that investors should dump before 2025 rolls around.
Qualcomm (QCOM)
The share price of system-on-a-chip (SoC) developer Qualcomm (NASDAQ:QCOM) has been a successful for most of 2024. By the middle of June, QCOM had surged more than 58.5% for the year. However, recent market headwinds have guided the semiconductor’s stock downward.
For those unaware, Qualcomm has had its hands in developing SoCs for both smartphones and automotives for some time now. If you’re carrying an Android phone, most likely Qualcomm had designed its processor and graphics chip. The semiconductor firm also designs speedy modems that help phones connect to the internet. Most famously, after Apple (NASDAQ:AAPL) failed to develop its own in-house modem, the iPhone-maker struck a deal to license Qualcomm’s 5G modems until 2027.
Nowadays, Qualcomm’s AI-powered Snapdragon SoCs for personal computers are thrusting Qualcomm back into the investor news cycle. In particular, the Snapdragon X Elite is a series of AI chips that will power a variety of PCs, effectively competing directly with chips from the likes of Advanced Micro Devices (NASDAQ:AMD) and others. However, it is not clear how successful these new chips will be since Qualcomm is essentially betting on these new AI features to spur consumer buying. With consumer confidence down, there’s no reason to believe that will happen.
Intel (INTC)
Intel (NASDAQ:INTC) is another stock to get rid of by 2025. Despite once being America’s crown jewel chipmaker, Intel has definitely lost the mantle. Back in 2020, while companies like AMD had pursued a fabless model of chipmaking, Intel had largely stuck to its prior model of owning the manufacturing process. While this strategy served Intel in the earlier years, it has become increasingly a burden. During that year, Intel had to delay its switch to 7 nanometer (nm) nodes, a node size at which Taiwan Semiconductor Manufacturing (NYSE:TSM) had already been manufacturing for Intel’s competitors.
Even after attempting to grant more autonomy to its foundry business by separating it from the larger corporation, Intel’s manufacturing headaches have not gone away. In fact, they have perhaps even gotten worse. Regarding Intel’s first quarter report for 2024, CNBC highlighted, “Intel Foundry reported $4.4 billion in revenue during the quarter, which was down 10% year-over-year, the company said. The unit reported a $2.5 billion operating loss during the March quarter.” Last year, Intel Foundry loss $7 billion.
Furthermore, Intel’s inroads into artificial intelligence are positive developments but still behind Nvidia’s latest chips and even underperform AMD’s AI chips in certain aspects. None of these developments paint a positive picture for INTC in the future, and if you have not sold Intel’s stock now, by 2025 should be your deadline.
Micron Technology (MU)
Micron Technology (NASDAQ:MU) is the final entry on this list. The semiconductor firm specializes in developing memory and storage products for companies around the world. These memory products include both dynamic random-access memory (DRAM) and static random-access memory (SRAM), both of which facilitate quicker functionality in smartphones and computers. Moreover, Micron also develops NAND flash memory and solid-state drives, which are capable memory storage systems for personal computers and servers.
Micron’s shares were also riding the AI hype train, rising nearly 80% for the year by the middle of June. The company is a key developer of high bandwidth memory (HBM), which have become almost critical for delivering the complex computing power needs of large language models. Third quarter earnings results soared passed guidance off the back of AI product demand. However, Micron’s Q4 2024 guidance came in below expectations, which underscores investors’ general concern over the AI hype.
On the date of publication, Tyrik Torres 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
