Should investors use the recent weakness in semiconductor stocks as a buying opportunity? Not quite yet, according to one analyst.
Shares of NVIDIA Corp, Advanced Micro Devices and Micron Technology have pared losses in Thursday morning action. But the Philadelphia Semiconductor Index is still down on the day, building on declines for the sector seen in Wednesday’s session, and general pressure over the past couple weeks as investors shift out of stocks levered to the artificial-intelligence trend.
It’s perhaps telling that chip-sector investors Thursday largely are shrugging off some upbeat incremental news for the industry, such as a beat-and-raise report from semiconductor-equipment company KLA-Tencor.
“It feels too early to be buying the dip in semis,” Mizuho desk-based analyst Jordan Klein wrote in a Thursday note to clients. He sees a lot of “tourist and generalist” investor dollars that he thinks could continue an unwinding of the momentum trade.
Klein flagged Taiwan Semiconductor Manufacturing’s report from last week, which he thought reflected a “fantastic” quarter. But TSMC shares have fallen to $155 from a record high of $191 earlier this month.
That “tells you this is a broader unwind that will take down all stocks no matter how good recent earnings or guidance,” according to Klein, who’s associated with Mizuho’s sales team and not its research unit.
When should investors get more serious about buying on weakness? Klein said to wait until more technology earnings reports come in, including those from Amazon.com, Microsoft, Meta Platforms, Inc., Advanced Micro Devices and Lam Research.
“Any issue with [Microsoft, Amazon or Meta] would not go over well,” in his view. “And we need more of an unwind in semis for me to get really excited,” he added.”
The PHLX Semiconductor Index is off fractionally in Thursday trading after losing 5.4% in Wednesday’s action.
Among notable recent moves in the semiconductor sector include AMD’s fractional decline, building on a 6.1% decline seen Wednesday. Super Micro Computer Inc.’s stock SUPER MICRO COMPUTER INC is also moving fractionally lower in Thursday action, following a 9.2% drop experienced Wednesday. Micron shares are down 1.7% in morning action, having lost 3.5% on Wednesday.
Western Digital and ARM Holdings Ltd could be some of the biggest Thursday decliners, with their shares down 7.7% and 5.4% respectively