The semiconductor sector has been one of the hottest in the market in recent years, but it has taken a beating in recent weeks. The iShares Semiconductor ETF (SMH) is down nearly 10% from its peak three weeks ago, and Nvidia (NVDA) is down 15%.
There are a few reasons for the sell-off in semiconductor stocks. First, rising interest rates are making investors less willing to buy risky assets. Second, the global economy is showing signs of slowing down, which could lead to weaker demand for semiconductors. Third, some chipmakers are facing rising costs, which could hurt their profitability.
Despite the recent sell-off, some analysts believe that semiconductor stocks are still a buy. They point to the long-term growth potential of the sector, which is being driven by the rise of artificial intelligence, 5G, and other technologies.
Here are some of the factors to consider when investing in semiconductor stocks:
- The overall health of the global economy. If the economy slows down, demand for semiconductors could decline.
- The competitive landscape. The semiconductor industry is highly competitive, and chipmakers are constantly innovating. This can lead to pricing pressure and margin compression.
- The cost of manufacturing. The cost of manufacturing semiconductors is rising, which could hurt profitability.
If you’re considering investing in semiconductor stocks, it’s important to do your research and understand the risks involved. However, if you’re looking for a long-term investment with growth potential, semiconductor stocks could be a good option.
Here are some additional thoughts from the transcript:
- Carter Worth, a technical analyst, believes that the semiconductor sector could fall another 4% to 7% from its current levels. He sees a “channel” forming on the charts, with the lower end of the channel providing support.
- Tim Seymour, a portfolio manager, believes that Nvidia is still a good investment, but he warns that investors should be prepared for a pullback after the company reports earnings on August 23rd. He thinks Nvidia could give up 10% to 15% of its value if it doesn’t raise guidance.
- Michael Hartnett, chief investment strategist at Bank of America, believes that the chip trade is cooling off and that investors should focus on “old economy” sectors like energy. He thinks that chip stocks are cyclical and capital-intensive and that they require strong secular trends to outperform.
Ultimately, the decision of whether or not to invest in semiconductor stocks is a personal one. It’s important to weigh the risks and rewards carefully before making a decision.