Semiconductors are the tiny silicon-based devices that power everything from our laptops and phones to our cars. Putting money in semiconductor stocks have been a good investment decision over the past 12 months, especially if some of that capital went to hold Nvidia (NASDAQ:NVDA).
The craze around artificial intelligence and machine learning boosted the shares of public semiconductor companies enabling growth in these novel fields. Similarly, semiconductor firms making cloud computing possible — and even quantum computing — have also made good bets.
Unfortunately, investors may be feeling AI “fatigue.” In the middle of June, NVDA entered correction territory after a number of investors sold off upon the chipmaker becoming the most valuable tech company in the world. The company has yet to recover from that sell-off.
Shortly after, Bloomberg News published an article in which it quoted a portfolio manager from Allspring Global Investments who said, “In the near-term, it is plausible that investors begin suffering from AI-fatigue or become more broadly concerned about index concentration.”
That also means investors should be careful about the semiconductor stocks they buy. Below are three semiconductor stocks investors should sell in June before they crash and burn.
Intel (INTC)
Chip designer and foundry Intel (NASDAQ:INTC) can’t seem to keep up with the competition.
Problems first began to arise for Intel when Advanced Micro Devices (NASDAQ:AMD) took the industry by storm with its powerful CPUs developed via fabless model that leveraged TSMC (NYSE:TSM) manufacturing prowess.
In 2020, Intel had to delay its 7-nm node processors and this precipitated an exodus of senior leadership. The once-acclaimed chipmaker also had to rethink the way it structured its business. Four years later, Intel still has not gotten over its foundry woes, despite having spun the business off into an autonomous unit.
In our current world of artificial intelligence-powering chips, Intel has fallen well behind Nvidia. More concretely, the recent iteration of the Gaudi series of AI accelerators are only competitive with Nvidia’s older, yet popular H100 and H200 accelerators. The Gaudi 3 processors will not even hit the market until later in the year.
INTC has plummeted 33% year-to-date, and with no clear pathway to surpass Nvidia, Intel shares will likely trend downward even more.
Aehr Test Systems (AEHR)
Aehr Test Systems (NASDAQ:AEHR) is another semiconductor stock investors should consider selling. The firm specializes in semiconductor testing equipment for a variety of industries and applications.
According to Aehr’s SEC 10-K filing, the FOX-XP and FOX-NP systems can “test, burn-in, and stabilize range of devices,” including silicon-carbide based products. These are essential to EVs and 2-D, as well as 3-D sensors for mobile phones and tablets.
Unfortunately, the EV market is in the midst of a slump, and with interest rates being as elevated as they are, the market for silicon carbide testing solutions will not be in its best shape.
Revenues for the semiconductor equipment firm’s third quarter results of fiscal year 2024 declined 56% year-over-year. The company noted that the results reflected “delays in wafer level burn-in system orders for silicon carbide semiconductor devices used in electric vehicles.”
AEHR shares have fallen more than 55% since the start of the year. A lack of a serious pick up in the EV market could keep share price growth subdued.
ON Semiconductor (ON)
On Semiconductor (NASDAQ:ON) is a diversified business that develops sensors and integrated chips for power management in vehicles and industrial machinery applications.
Furthermore, the Onsemi’s “intelligent power” chips allow for longer-range electric vehicles, as well as enables fast-charging systems. Outside of the electric vehicle industry, solar companies and energy storage systems also leverage the company’s power efficiency solutions.
The semiconductor firm’s newest product end-market has been data centers. Because of the massive amounts of AI workloads going through today’s servers, data centers end up consuming a lot of power. In response, Onsemi announced the T10 PowerTrench product family and EliteSiC 650V MOSFETs, which are designed to create power efficiency in data centers.
Unfortunately, Onsemi’s outsized exposure to EVs have led to sizable declines in revenue, especially over the last few quarters. Similar to AEHR, Onsemi’s share price is unlikely to recover amidst the ongoing EV slump.
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.
