Semiconductor microcircuits are falling Should I buy them
- May 21
Yesterday on Wednesday May 18, 2022, together with the US stock market, shares of companies producing semiconductors fell sharply. This sector survived another difficult day with a total decline by more than 4% for brands such as Advanced Micro Devices (AMD), NVIDIA (NVDA), Micron Technologies (MU), Qualcomm (Qcom), Intel Corporation and Texas Instrument Incorporated (TXN).
NVIDA was the greatest decrease, which fell by 6.8% on May 18, 2022 when the market was closed and 43.77% in the cost of the beginning of the year, it follows Qualcomm, which fell by 6.6% and lost 29.9% in the cost from the beginning of the year. AMD fell by 6.04%, and its shares lost 35.9% in price from the beginning of the year, while Intel shares fell by 4.62% with a fall from the beginning of the year by 20.4%. Micron Technologies shares decreased by 4.51% with a fall from the beginning of the year by 25.80%. Texas Instruments had the smallest fall, which lost only 2.67%, falling by 10.65% since the beginning of the year.
The main reason for the sales of semiconductor companies is to reduce the levels of reserves of microcircuits due to the ongoing world deficiency of chips. The industry also faced many problems due to obstacles in the supply chain, even despite the growth of demand from consumers. Now the industry is faced with quarantine in China due to Covid, at a higher rate of inflation, holding back consumer expenses, as well as growing energy prices all over the world due to sanctions against Russia.
Despite the reporting last quarter, when large companies reported on income that exceeded estimates, investment in the shares of semiconductors may not be a very good opportunity now. Investors should expect a further decrease in shares further since the problems remain and cannot be resolved in the near future.
Some analysts of the technological sector say that this recent rollback is similar to the sales that occurred in 2018, when the shares reached their record maximum, and the increase in prices for the chips pushed sales up. But the increased demand for chips from customers led only to an increase in the sales of chips, while their reserves fell. Short -term prospects are weak, since investors are waiting for the managers of manufacturers of microcircuits to put their volumes of production in the new conditions.
From an investment point of view, the shares of semiconductors are almost not suitable for investment today. Investors who want to buy them essentially buy a “reduction” of production, the reflection of which can occur in the second half of 2022. Thus, we can only observe the further fall of the sector and guess whether manufacturers of microcircuits will be able to solve the problem of upcoming reductions in their reserves. All this is very similar to the collapse of the shares of technological companies in 1999 and early 2000.
Against the background of all this, the manufacturer of the NVIDIA graphic processors was reduced to a “neutral” status after companies reduced the release of their graphic processors. Manufacturers of smartphones reduce supplies too.
Nikkei Asia said that the main manufacturers of smartphones in China told their suppliers to reduce future orders by about 20% due to Covid blocking. Chinese companies Oppo, Vivo and Xiaomi are faced with a decrease in consumer confidence and problems in the supply chain and plan to produce fewer smartphones.
Sources said that Xiaomi, the largest smartphone manufacturer in China, told its suppliers that it would put in 2022 a total of 160 to 180 million units compared to the previous purpose of 200 million. In 2021, Xiaomi shipped 191 million smartphones.
Thus, investors who are still not in positions and have not yet bought stocks of manufacturers of microcircuits and semiconductors should take this into account. However, when restoring the production of chips and restoring the supply chains of the shares of semiconductor companies, they will become parabolic, which means that they can quickly grow in a short period.
Vladimir Sagalaev, financial analyst of the CMS group of companies
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