Semi Focus Returns to Wall Street Again！
Last week, the semiconductor industry experienced a wild ride as two giants in the field released vastly different earnings reports and forecasts, creating sharp divides within the sector.
In the coming weeks, U.S. semiconductor stocks will remain in the spotlight for investors. As critical components in numerous products, the performance of chip manufacturers and related equipment companies is key to understanding economic conditions, making them a barometer for the broader market on Wall Street.
AI-Driven Momentum
This year, the semiconductor industry has been heavily highlighted due to AI boom, which has been a core factor driving the stock market to new highs. Notable gains have been seen particularly in $NVIDIA Corp(NVDA)$ .
$Philadelphia Semiconductor Index(SOX)$ surged over 40% in the first half of the year before experiencing a pullback. Currently, this index is up about 25% for 2024, while the S&P 500 has gained 22.5% in the same period.
Matt Maley, Chief Market Strategist at Miller Tabak, emphasizes the importance of chip stocks to the broader market. A decline in Semi shares would likely drag down the entire market. Semi and related equipment stocks account for 11.5% of the $.SPX(.SPX)$ , with Nvidia alone representing a hefty 6.8%.
Volatility in the Semi Sector
Following last week’s major earnings releases, the semiconductor sector saw significant volatility. Europe’s largest tech company, $ASML Holding NV(ASML)$ , reported 2025 sales and booking guidance below expectations, leading to a sharp drop in chip stocks on Tuesday.
Conversely, $Taiwan Semiconductor Manufacturing(TSM)$ , a major player in AI chip production, announced a stunning 54% year-over-year profit increase, which triggered a rebound in stocks on Thursday.
This week, the semiconductor industry will be reporting more earnings, including those from $Texas Instruments(TXN)$ and $Lam Research(LRCX)$ .
Daniel Morgan, a portfolio manager at Synovus Trust, notes that Texas Instruments has a wide range of applications, including in the automotive and industrial sectors. Their report may provide insights into the recovery of chip demand in these areas. Currently, the price-to-book ratio for the semiconductor sector stands at 5.6, significantly lower than the over 8 seen in 2021.
Next week, $Advanced Micro Devices(AMD)$ ’s earnings report will help gauge demand related to AI, followed by the highly anticipated Nvidia report. If AMD forecasts strong AI chip demand for 2025, it could be a positive sign for the entire semiconductor sector.
Chuck Carlson, CEO of Horizon Investment Services, remarks, “Even from a market cap perspective, the importance of the semiconductor sector cannot be underestimated.”
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