Semiconductor stocks - Safe to buy now?
Earlier this week, earnings reports from Google's parent company, Alphabet, and Tesla led to a slump in big tech stocks, and the biggest daily decline for Wall Street's major benchmarks in over a year. Investors were expecting perfection from the tech giants' earnings reports. There has also been a broader shift among investors away from tech and toward smaller stocks, as macroeconomic dynamics appear increasingly favorable to smaller companies' shares. Let's look at the movement of several semiconductor stocks which experienced a bad selloff this week.
NVIDIA
Nvidia Chief Executive Officer Jensen Huang unloaded shares worth nearly USD 169 million in June, the most he netted in a single month, as insatiable demand for the chips used to power artificial intelligence drove the stock to fresh peaks.
Nvidia daily chart
As shown in the chart above, since the bearish engulfing candle appearance towards mid of July, NVIDIA share price retraced continuously for 2 weeks. Currently, we can observe a clear downtrend pattern (drawn in ORANGE colour) in NVIDIA chart. As long as NVIDIA enables to breakout from its downtrend line resistance, I believe its share price will continue to pullback $NVIDIA Corp(NVDA)$
AMD
Demand for more computing power in the data center is growing at a staggering pace, and AMD has revealed that it has had serious inquiries to build single AI clusters packing a whopping 1.2 million GPUs or more.
AMD daily chart
For AMD, its share price is much weaker as compared to NVIDIA. A critical bearish sign in AMD chart in which we observe that AMD failed to sustain above its EMA200 trendline (green coloured line). Since April this year, AMD never failed to stand above to this EMA200. Even it retraced towards this line, the share price rapidly rebounded but it was no longer the case this time. The share price $Advanced Micro Devices(AMD)$
Intel
Despite governmental support and funding, Intel's stock remains risky due to poor financial performance and loss of market share in core areas. Intel has significant backing from the U.S. government and politicians, but it continues to lose market share in desktop CPUs and faces competition from ARM-based chips.
Intel daily chart
As a dead cross occurred between EMA50 and EMA200, a mid to long term bearish movement for Intel is unavoidable. The share price began to rebound in early July but unfortunately it started to retrace upon touching EMA200 (green coloured line) resistance. Anyway, the only good news is the current share price is very close to its nearest support at 29.80 USD. Intel has really been undervalued for so long and I bet for a positive surprise in next week earnings result. Bullish for Intel $Intel(INTC)$
TSM
TSMC is the world's largest semiconductor foundry, with a 61% market share of the global semiconductor foundry market as of the end of 2023. Its foundry model means it creates semiconductors chips for customers' specific needs rather than for general sales.
TSM daily chart
Similar to most of the other semiconductor stocks, TSM retraced significantly since 2 weeks ago. Glad to see that the share price seems to gain some minor support and buying momentum when it approachs its near term neckline support at 159.24 USD. As long as the share price stays above this neckline support, I remain optimistic for TSM $Taiwan Semiconductor Manufacturing(TSM)$
SOXL
SOXL is an ETF that offers 3x daily long leverage to the PHLX Semiconductor Index, making it a powerful tool for investors with a bullish short-term outlook for semiconductor equities. Investors should note that SOXL's leverage resets on a daily basis, which results in compounding of returns when held for multiple periods. SOXL can be a powerful tool for sophisticated investors, but should be avoided by those with a low risk tolerance or a buy-and-hold strategy.
SOXL daily chart
A massive strike on SOXL index due the significant pullback of semiconductor stocks. Bloody approximately 50% of correction from recent peak. What we can observe now is, SOXL share price is challenging its EMA200 trendline support this week. This is a very strong long-term support line, I believe SOXL $Semiconductor Bull 3X Shares(SOXL)$
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The recent slump in big tech stocks, including semiconductor stocks, can be attributed to the earnings reports from companies like Alphabet and Tesla, which did not meet investors' high expectations. Additionally, there has been a shift among investors towards smaller stocks, as macroeconomic dynamics appear to be more favorable for these companies.
Regarding NVIDIA, the stock has been experiencing a downtrend pattern since mid-July, as shown in the daily chart. The stock is currently facing resistance at its downtrend line. If NVIDIA is able to break out from this resistance, it may indicate a potential reversal in the stock's price.
As for the LX Semiconductor Index (SOXL), it has seen a significant pullback due to the correction in semiconductor stocks. The index is currently challenging its EMA200 trendline support, which has historically been a strong long-term support level. If SOXL is able to find support and rebound from this level, it could indicate a potential bottom and a strong recovery.
Investing in AI or semiconductor-related stocks can be a viable option for investors. However, it is important to consider the risks involved, especially in volatile market conditions. It is recommended to conduct thorough research and analysis before making any investment decisions.
Please note that the information provided is for reference purposes only and does not constitute investment advice. Investing in stocks involves risks, and it is important to carefully consider your own risk tolerance and investment goals before making any investment decisions.