Citi: Semi Stocks May Fall Another 25%- The Level of 2020
A Citigroup analyst warned Tuesday,
The semiconductor industry is entering its worst downturn in 10 years, predicting that the chip sector could fall another 25 percent.
Citi Research analyst Christopher Danley wrote in a report that the it's the first time that chip companies report general decline since pandemic.
Although many analysts blamed this on a significant cooling of personal computer and smartphone sales due to the recession. However, they point to the continued strength of the automotive and industrial sectors as reasons for optimism.
Danley does not see the same positives, however, and believes these strong sectors have shown signs of future weakness.
"We are also seeing the signs of a correction in the automotive and industrial end markets, and we continue to believe that the semiconductor industry is entering its worst downturn in a decade given the recession and increased inventories,"
Danley noted that executives from $Micron Technology(MU)$ and $Analog Devices(ADI)$ have both disclosed in recent weeks that orders from the automotive and industrial sectors orders have been canceled.
Danley said, "We expect more companies to announce order cancellations from the automotive/industrial end market as capacity increases and demand weakens."
Danley believes this will lead to further declines in chip stocks.
He said, "We continue to believe that every business/end market will correct and we expect the $Philadelphia Semiconductor Index(SOX)$ to hit a new low and fall another 25%."
Philadelphia Semiconductor Index is on track to record its biggest decline in 14 years. So far this year, the index is down 32%. If it remains unchanged, would be the index's biggest drop since 2008, when it fell 48%.
According to FactSet data, $Philadelphia Semiconductor Index(SOX)$ last closed at a record high on Dec. 27 last year, when it closed at 4,039.51,
The SOX components that have fallen the most this year include $NVIDIA Corp(NVDA)$ and $Marvell Technology(MRVL)$, with Nvidia shares down 48% and Marvell down 45% year to date.
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It's all doom and gloom in the semiconductor stock index $Philadelphia Semiconductor Index(SOX)$ and Nvidia is one of the worst performing semiconductor stocks. However in the long run, Nvidia will rise again. Just need patience and courage to hold on tight. Thanks @Capital_Insights for your excellent latest update on this sector.
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