Chip stocks displayed weaker performance compared to the broader market on Thursday as the semiconductor industry marked its 11th consecutive month of significant losses compared to the same period last year.
According to the Semiconductor Industry Association, global chip sales in May declined by 21.1% to $40.7 billion, down from April 2022’s $51.7 billion. John Neuffer, the Chief Executive of SIA, acknowledged the ongoing sluggishness in the market but noted a slight month-to-month increase in global semiconductor sales for the third consecutive month. This development has sparked optimism for a potential market recovery in the second half of the year.
On Thursday, the PHLX Semiconductor Index (SOX) experienced a decline of 1.3%, while both the S&P 500 Index and the Nasdaq Composite Index closed down 0.8%.
SIA anticipates a 10.3% decline in chip sales for/2023, followed by an 11.9% rebound in growth in 2024, based on forecast data from the World Semiconductor Trade Statistics.
Year-to-date, the SOX index has witnessed a 41.3% increase, surpassing the 30.7% gain by the Nasdaq and the nearly 15% rise by the S&P 500.
Among the large-cap companies, Nvidia Corp. has emerged as a leading gainer in the chip sector, with its shares rallying by 178% in/2023, fueled by the promising prospects of capitalizing on artificial intelligence models such as Microsoft Corp.-backed OpenAI’s ChatGPT.
Other notable gainers include Advanced Micro Devices Inc. with a 50.6% rally, Marvell Technology Inc. with a 58.8% gain, Lam Research Corp. with a 47.8% increase, ON Semiconductor Corp. with a 48.5% surge, and Broadcom Inc. with a growth of 51.7%.
Christopher Danley, an analyst at Citi Research, highlighted increasing sales growth and pricing but maintained a cautious stance on the sector. He emphasized Micron Technology Inc., a memory-chip maker, as his top pick, predicting an inventory correction leading analog companies to lower their outlook during the summer.
Micron recently reported earnings and declared a bottom in the memory-chip market.
C.J. Muse, an analyst at Evercore ISI, included Nvidia, Marvell, and Broadcom as his top picks and maintained his industry sales forecast of $420 billion for the year, excluding memory sales.
Intel Corp. shares have risen by 21% year-to-date, while Taiwan Semiconductor Manufacturing Co.’s ADRs have gained 33.5%. Conversely, shares of Texas Instruments Inc. have experienced a modest increase of 5.8% this year, with Qualcomm Inc. shares up only 4.8%.
PC manufacturers Dell Technologies Inc. and HP Inc. have witnessed their shares rise by 33.8% and 15% respectively over the course of the year.
