As September kicked off, chip stocks experienced their worst stretch in over four years, led by a decline in shares of Nvidia and concerns over U.S. economic growth. The VanEck Semiconductor ETF (SMH) plummeted 11.7% in a four-day trading week, marking its most significant drop since March 2020. This turbulent period adds to what has been a volatile summer for the semiconductor industry.
Semiconductor stocks are known for their cyclical nature, closely tied to economic fluctuations, and now, with a surge in artificial intelligence (AI) interest, the sector is facing even more ups and downs. Despite the recent turmoil, Wall Street analysts are maintaining their optimism. Cantor Fitzgerald analyst CJ Muse urged investors to “Just Keep Truckin’ On” amidst the mid-cycle correction and to remain overweight on semiconductors.
While some chipmakers like Intel have faced challenges, much of the recent sell-off appears to be unrelated to business fundamentals. For instance, Broadcom saw a 10.4% drop in its stock price despite beating analysts’ earnings and revenue estimates. Analysts like Stacy Rasgon believe that beneath the surface, there are positive signs of growth, especially in non-AI semiconductor businesses.
In response to the sector’s instability, VanEck recently launched a new fund, the VanEck Fabless Semiconductor ETF (SMHX), focusing on companies that design chips but do not manufacture them. This shift towards asset-light, innovative companies aligns with the booming AI industry. Despite the broader industry challenges, with SMHX also experiencing a decline last week, the focus remains on long-term growth potential.
Investors will be looking for updates from key semiconductor players at the upcoming Goldman Sachs Communacopia + Technology Conference, where industry executives including those from Nvidia and Advanced Micro Devices are scheduled to speak. As we navigate through this period of uncertainty in the semiconductor market, it is essential to stay informed and look for opportunities that align with the future of technology. Keep an eye on our Extreme Investor Network for more insights and analysis on the dynamic world of investing in semiconductors and beyond.