Chip Demand Waning... Or Not? 

Blood bath for semiconductor stocks last couple of days, but is it over? Lots of report on slowing growth and reduced demand for chips. For e.g.

-Crypto crash, less crypto mining 

-PC, laptops demand drops as noone works from home these days! 

-Inflation fears impacts consumer purchasing power. 

Well, here are my views on selected stocks on my radar. 

For $AMD(AMD)$, let's wait for Q2 results and reaction. PE ratio at 29 can still be compressed towards low 20s if growth slows. That brings us to a stock price of $50-55 somewhere close to April-June 2020 price. 

At $50, that gives a PE of 20x which is a very good entry. Strong support at this level too. 💪 March 20 COVID lows was at $40. Hard to see this stock go any lower than that. 

$NVIDIA Corp(NVDA)$has an even higher PE (at 41x) than AMD, so from a value perspective, it is less attractive. Despite that, NVDA is a leader for GPU chips and will continue growing.  We just need a more compelling entry price in a turbulent market. 

There are some semiconductor stocks whose PE is already "low" for e.g. $Qualcomm(QCOM)$whose PE is at 13x. This makes it look better when compared to higher PE semiconductor stocks like AMD or NVDA. And it pays a 2.2% dividend. 

However, proceed with caution and wait for Q2 earnings. The bear market takes no prisoners and low can get lower. 

One reason QCOM has lower PE multiples than AMD is due to slower growth expected. However from the table below for the Top 10 IC design companies based on Q1 22 earnings, it isn't too far off.  In addition, QCOM is holding well in the market especially with recent news on $Apple(AAPL)$struggling to make its own 5G chip and extending AAPL's dependence on QCOM chips.

In a nutshell, this bear market can't last forever, but it can last for a while. Let's not rush in despite the current pullback because the future outlook is still uncertain. 

@TigerStars@Mainstreet_Trades@Daily_Discussion