After chipmaker, Micron Technology Inc. (NASDAQ:MU) issued the latest warning about falling demand, semiconductor stocks fell, raising worries that the sector was ready to experience a harsh collapse.
The Philadelphia semiconductor index in the US fell 4.6 % on Tuesday, its worst decline in roughly two months, with all 30 components trading lower. Taiwan Semiconductor Manufacturing Co. (TPE:2330), Samsung Electronics Co., SK Hynix Inc., and Tokyo Electron Ltd. (TYO:8035) were among the semiconductor stocks that fell in Asia. Investors are becoming warier and warier as the typically cyclical industry hurtles toward a protracted downturn due to years of severe capacity constraints.
Semiconductor Analysis
Christopher Danely, a Citigroup Inc. (NYSE:C) analyst, said in a report that they continue to believe they are entering the worst semiconductor downturn in at least a decade, possibly since 2001, given the presumption of a recession and inventory build. They expect every company in their coverage universe and every end market to experience a correction, he added.
After a disappointing performance from Advanced Micro Devices Inc. (NASDAQ:AMD), Intel Corp., and Nvidia Corp., Micron (NASDAQ:MU) issued the warning. Micron (NASDAQ:MU) noted that since the company’s last update a little over a month ago, orders have declined, underscoring the rate at which demand dissipates. The need for personal computers has already been poor, but it is now becoming more widespread.
In an interview with Bloomberg Television, Chief Executive Officer Sanjay Mehrotra said, compared to our last earnings call, we see further weakening in demand because of adjustments broadening outside of just consumers to other parts of the market, including data centers, industrial and automotive.
Due to anticipation that persistent shortages will support demand even in the face of an economic slowdown, semiconductor stocks rose at the beginning of July. However, they started to have a significant negative impact on the broader Nasdaq 100 Stock Index due to a run of poor financial reports and forecasts from chipmakers like Nvidia. Before memory and hard drive manufacturer Western Digital Corp. helped propel a selloff in response to a disappointing sales estimate on August 5, the benchmark rose over 20% from a June low. Since then, the Nasdaq 100 has decreased three days in a row.
Edward Moya, the senior market analyst with Oanda, said that it appears to be a challenging market for everyone after both Nvidia and Micron (NASDAQ:MU) had to slash their outlooks. Consumers stocked up on cellphones and PCs during the Covid epidemic as they worked and studied from home. Businesses also invested heavily in technology, particularly data centers that could be utilized to support remote workers.
Chip shortages are still a problem. The average wait time for semiconductors increased to 27 weeks in June, costing businesses like Apple Inc. (NASDAQ:AAPL) and Toyota Motor Corp. (TYO:7203) billions of dollars in sales because they could not obtain enough chips. Average lead times were often shorter than 15 weeks before the epidemic.
Featured Image: Megapixl @Kalman89
