Shares in semiconductor companies, including industry leaders AMD and Nvidia, were negatively impacted by weaker-than-expected economic data and concerns of a potential recession. AMD shares fell by over 4%, while Nvidia’s declined by 3.5%, in part due to worries that Google’s fourth-generation Tensor Processing Units are faster and more power-efficient than Nvidia’s A100 chips. Although the TPUs were not compared with NVIDIA’s H100 chips, they are expected to put pressure on the company to remain at the forefront of chip technology. Other companies were similarly affected, with Taiwan Semiconductor, the world’s largest semiconductor foundry, falling by nearly 3% and GlobalFoundries slumping 4.6%.
Some analysts see these dips as an opportune time to buy, with David Moadel, managing partner at PortfolioWealthGlobal.com, stating, “I think semiconductor stocks in general remain bullish in the long term”. The drop in prices provides an opportunity to scoop up some bargains, he suggests. In the short-term, however, a chip shortage remains an area of concern, with certain companies’ revenues anticipated to decline somewhat dramatically.
The semiconductor market reported a strong rebound in February, however, with the Semiconductor Industry Association reporting that sales jumped 13.2% and 14% year-over-year in the Americas and Asia Pacific markets, respectively. As global economies look to emerge from the downturn caused by the pandemic, increased demand is anticipated for semiconductors as businesses look to invest in emerging technology such as 5G and AI, as well as in traditional markets such as personal computers and smartphones.
Industry analyst Luke Lango is bullish on the sector longer-term, writing in an article for InvestorPlace, “The chip shortage is a significant near-term challenge, but I think it is both temporary and limited to select end-markets. As such, chip stocks should perform quite well over the next five to 10 years, as the number of electric vehicles, data centres and 5G networks in the world all continues to soar.”