Semiconductor stocks have been obliterated in recent weeks. True, the painful summertime tumble may be an excellent opportunity to buy at a slight discount. Yet, it’s tough to tell how low the prices will go as the industry experiences its worst plunge in almost two years.
At the time of writing, the VanEck Semiconductor ETF (NASDAQ:SMH) is off 17.9% from its high. A textbook double-top technical pattern has played out for SMH stock. And though the implied downside from the pattern may already be in, it’s hard to know when the semi bloodbath will reverse course. It did not take long for Wednesday’s relief rally to be proven as nothing more than a dead cat’s bounce (sorry to all the cat lovers!).
If you still want to increase your exposure to the AI trade, don’t let the recent weakness deter you. Just be prepared to ride out the massive waves and then swim to shore if you happen to wipe out!
Advanced Micro Devices (AMD)
It seems like the strong quarterly showing from Advanced Micro Devices (NASDAQ:AMD) on Tuesday has been completely forgotten. The solid numbers actually helped give a lift to the broader semi-scene for at least a day.
Now it seems like AMD stock is succumbing to gravity. Shares are now shedding the big post-quarter gains a bit more. Indeed, it seems like the strong result is now coming “for free,” with shares now down over 37% from all-time highs.
Of course, AMD is no Nvidia, but it is continuing to ride the high wave in artificial intelligence (AI). And, though the stock has wiped out, the business still seems as healthy as ever. Investors overlook the company’s raised AI chip guidance while they flee to safety trades. So, it may make sense to give AMD stock the benefit of the doubt. Demand for Instinct and Ryzen processors could keep delivering for the firm through the second half.
Intel (INTC)
Did you think things couldn’t possibly get worse for Intel (NASDAQ:INTC) as it sunk to new 52-week lows? Well, the company delivered a brutal second-quarter miss. Additionally, it announced it’s doing away with its dividend come the fourth quarter in an effort to shore up some cash. The stock imploded almost 19% in the after-hour’s session in response. That’s on top of the 5.5% plunge it suffered on Thursday’s session.
The fallen chipmaker failed to hit some pretty depressed estimates, which is quite concerning. Also, a massive layoff of 15,000 employees (over 15% of staff) has been announced. Unsurprisingly, the bullish contrarian case for buying INTC stock seems to be getting weaker by the month.
Still, the deep-value play is getting cheaper. And if you still have confidence in management and cost-cutting efforts, perhaps the latest crash is a buying opportunity.
Taiwan Semiconductor (TSM)
Taiwan Semiconductor (NYSE:TSM) is a blue-chip fab giant that tends to be a great pick-up whenever the semiconductor trade heads south.
After tumbling 4.6% on Thursday, TSM stock is now down more than 17% from its peak, about in line with the SMH’s plunge. Unlike many overheated chip stocks with the AI tailwind at their back, TSM stock actually looks quite cheap at 25.9 times forward price-to-earnings.
Undoubtedly, geopolitical volatility could accelerate if presidential candidate Donald Trump takes to the Oval Office next year. In any case, such fears are likely to be overblown and serve as nothing more than opportunities to add to a position.
With a nice 1.5% dividend yield to go, perhaps Taiwan Semiconductor is the blue-chip chip stock is too good to pass up as the bear market comes for the semiconductor stocks.
On the date of publication, Joey Frenette 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.
