Semiconductor or chip stocks fell sharply last Thursday, with Broadcom and Micron Technology being the most heavily sold amid growing investor concerns that this sector may have risen too rapidly.
Broadcom, a designer and manufacturer of AI chips for major technology industry clients, dropped by as much as 12% after announcing earnings on Wednesday that fell short of analyst expectations.
Meanwhile, Micron Technology, one of the world's largest memory chip producers, declined by over 7%, while ARM Holdings, owner of chip architecture technology widely used in smartphones and electronic devices, fell 4%.
According to CNBC, John Vinh, an analyst at Keybanc Capital Markets, said the sell-off in Broadcom and other chip stocks is understandable because these shares had previously surged strongly on AI-related enthusiasm.
“These stocks have risen very sharply recently,” Vinh said, explaining that analysts and investors have been continuously raising earnings forecasts for chip companies, particularly those involved with AI.
He believes Broadcom's decline reflects that market expectations for chip businesses had become so high that the stock price had already priced in most good news, so when earnings results were less impressive than hoped, investors chose to take profits.
Besides Broadcom, other chip stocks also fell: Qualcomm dropped 2%, Intel fell nearly 1%, and AMD declined 3%. Marvell Technology, although opening lower, managed to recover and closed up nearly 5%.
On another note, HSBC analysts led by Max Kettner, Head of Multi-Asset Investment Strategy, stated one of their biggest concerns is the softening chip prices, signs that AI investments may be slowing, and that AI adoption might not be as rapid as the market had anticipated.
Vinh also pointed out that Broadcom is facing additional pressure from Google, a major customer, which has begun diversifying its chip orders among other manufacturers instead of relying solely on Broadcom as before.
Nevertheless, he remains optimistic about Broadcom's future and believes this recent pullback is merely a short-term consolidation.
Keith Lerner, Chief Investment Officer and Chief Market Strategist at Truist Wealth, said it is normal for markets or certain stock groups to pull back after a strong rally.
Lerner explained that the bull market is not over and there are still reasons to be confident, but naturally, markets do not rise continuously; they often have periodic pauses or corrections.
“Typically, markets move forward two steps then back one, but recently it felt like three steps forward in a row. Therefore, a small pullback or sideways movement to consolidate is not surprising,” he said.
Overall, the situation reflects that while AI businesses and the chip industry have long-term growth potential, in the short term, investors are questioning whether stock prices have risen too quickly, leading to profit-taking and pressure on many chip stocks.
Source:CNBC
Follow the Facebook page: Thairath Money at this link -https://www.facebook.com/ThairathMoney