Finance
Why semiconductor stocks fell today
As the trading week came to a close, investors were feeling quite down about the semiconductor industry. Many stocks in the sector had been riding high on the big promise artificial intelligence (AI) increase their results. However, there are some sour comments in recent earnings reports from major chippies – especially in sector king guidance Taiwanese semiconductor manufacturing (NYSE: TSM) — led to a fairly broad sell-off on Friday.
Taiwan Semi, which fell by more than 3%, had plenty of company. Specialist in storage chips Micron technology (NASDAQ:MU) ended the day almost 5% lower, and analog chipmaker Texas Instruments (NASDAQ: TXN) down by more than 2%.
Uncomfortable news from Taiwan
What’s happening with Taiwan Semi reverberates across the chip sector, as the contract manufacturer is now the 800-pound gorilla of the industry.
On Friday, investors were still digesting the Asian company’s shares profit for the first quarter issue published Thursday. While revenues rose by double digits and total net profit came in almost 9% higher – both ahead of analyst consensus expectations – the company’s expectations were somewhat concerning.
Management pointed out that there is weakness in the previously strong global smartphone market, a dynamic that threatens to weaken the sector’s future growth. Yes, AI will certainly be the rising tide that lifts all boats, but the gains are limited if smartphones put a heavy burden on these watercraft.
Another not so positive development occurred Super microcomputer, a semiconductor industry supplier widely expected to be a major beneficiary of the AI revolution. The company has apparently opted not to announce its latest quarterly results in advance, which has become a company habit of late. Market players speculate that this is because the numbers will not look so good.
Given the sluggish growth of many chip companies and the feverish adoption of AI, more than a few analysts expect improvements to Supermicro’s fundamentals when it reports these fiscal second-quarter results.
Smartphones – no shocker
The world is still in the grip of AI fever, so ultimately the technology will keep the growth engine running for the better semiconductor companies that power it.
While smartphones remain popular products for much of the world, it is not surprising that they are no longer a source of strong growth. Improvements to their features these days are often incremental and users hold on to models longer before upgrading. It’s not that this segment is in freefall, or that this is a shocking development. This is likely one reason why semiconductor stocks’ decline wasn’t more dramatic on Friday.
Should You Invest $1,000 in Semiconductor Manufacturing in Taiwan Now?
Consider the following before buying shares in Taiwan Semiconductor Manufacturing:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $518,784!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
*Stock Advisor returns April 15, 2024
Erik Volkman has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Taiwan Semiconductor Manufacturing and Texas Instruments. The Motley Fool has one disclosure policy.
Why semiconductor stocks fell today was originally published by The Motley Fool
