If you’re into tech stocks — or if you tried to buy a car or computer anytime recently — you’ve heard about the semiconductor chip shortage that helped push prices higher. But as an investor, you need to start thinking about what’s next — the coming chip glut — and how that will affect chip stocks.
Yes, there’s a chip glut coming. Semiconductors are considered a pretty cyclical industry and plants are churning out as many chips as they can right now to meet the pent-up demand.
But those heady times for chip companies are coming to an end. Gokul Hariharan, co-head of Asia-Pacific TMT Research atJPMorgan Chase(NYSE:JPM), told theSouth China Morning Postthat it’s too early to say exactly when the glut will happen —but it’s on the way.
“Our view is that when we come to 2023, there will be sufficient supply to come back into some degree of balance, or maybe even overcapacity,” he said. Hariharan said revenue decline of 2% for the industry is possible.
Are you thinking that 2023 is a long way away? Not really. And not when you consider that many semiconductor stocks havealready given backhuge chunks of the gains they earned over the last two years.
If you wait until 2023 to drop your semiconductor stocks, you may be waiting too long.
Micron Technology (MU)
Micron Technology(NASDAQ:MU) is a semiconductor company that operates in 20 countries. It gets the largest share of its revenue from its computer and networking business unit. But it also manufactures chips that are used in consumer electronics, autos and computer products.
Earnings for the company’s second fiscal quarter were solid, withrevenue of $7.79 billionthat beat analysts’ estimates for growth by more than 25%. MU also posted earnings-per-share of $2.14.
“Micron’s excellent second quarter results exceeded the high end of our guidance for both revenue and margin, reflecting our strong execution,” President and CEO Sanjay Mehrotra said. “We’re leading the industry in technology across DRAM and NAND, and our product portfolio momentum is accelerating. With outstanding first half results, Micron is on track to deliver record revenue and robust profitability in fiscal 2022.”
While the stock rose by 4% on the earnings report, Micron quickly gave those profits back on fears of theupcoming semiconductor glut.
MU stock is up nearly 48% higher today from where it was two years ago. But as recently as January, MU stock had gains of more than 120%. Those days seem far away now.
Comments
What is that? Seriously????