Buy the Dip on Nvidia and Other Chip Stocks? Not Quite yet, Says This Analyst
Should investors use the recent weakness in semiconductor stocks as a buying opportunity? Not quite yet, according to one analyst.
Shares of NVIDIA Corp $NVIDIA (NVDA.US)$ , Advanced Micro Devices $Advanced Micro Devices (AMD.US)$ and Micron Technology $Micron Technology (MU.US)$ have pared losses in Thursday morning action. But the Philadelphia Semiconductor Index is still down on the day, building on declines for the sector seen in Wednesday’s session, and general pressure over the past couple weeks as investors shift out of stocks levered to the artificial-intelligence trend.
It’s perhaps telling that chip-sector investors Thursday largely are shrugging off some upbeat incremental news for the industry, such as a beat-and-raise report from semiconductor-equipment company KLA-Tencor.
“It feels too early to be buying the dip in semis,” Mizuho desk-based analyst Jordan Klein wrote in a Thursday note to clients. He sees a lot of “tourist and generalist” investor dollars that he thinks could continue an unwinding of the momentum trade.
Klein flagged Taiwan Semiconductor Manufacturing’s report from last week, which he thought reflected a “fantastic” quarter. But TSMC $Taiwan Semiconductor (TSM.US)$ shares have fallen to $155 from a record high of $191 earlier this month.
That “tells you this is a broader unwind that will take down all stocks no matter how good recent earnings or guidance,” according to Klein, who’s associated with Mizuho’s sales team and not its research unit.
When should investors get more serious about buying on weakness? Klein said to wait until more technology earnings reports come in, including those from Amazon.com $Amazon (AMZN.US)$ , Microsoft $Microsoft (MSFT.US)$ , Meta Platforms $Meta Platforms (META.US)$ , Inc. Advanced Micro Devices $Advanced Micro Devices (AMD.US)$
“Any issue with [Microsoft, Amazon or Meta] would not go over well,” in his view. “And we need more of an unwind in semis for me to get really excited,” he added.”
The PHLX Semiconductor Index is off fractionally in Thursday trading after losing 5.4% in Wednesday’s action.
Among notable recent moves in the semiconductor sector include AMD’s fractional decline, building on a 6.1% decline seen Wednesday. Super Micro Computer Inc.’s stock SUPER MICRO COMPUTER INC $Super Micro Computer (SMCI.US)$ is also moving fractionally lower in Thursday action, following a 9.2% drop experienced Wednesday. Micron shares are down 1.7% in morning action, having lost 3.5% on Wednesday.
Western Digital and ARM Holdings Ltd $Arm Holdings (ARM.US)$ could be some of the biggest Thursday decliners, with their shares down 7.7% and 5.4% respectively
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Aaron Invests (AI) : I bought the dip. For reasons in confidence and conviction. Else trade with caution. I am confident that $Amazon (AMZN.US)$ & $Meta Platforms (META.US)$ will project a good result. Rooting more on AMZN than META
Tonyco Aaron Invests (AI) : $Amazon (AMZN.US)$ seems a little undervalue honestly
Aaron Invests (AI) Tonyco : Agree is better to be time in the market than timing the market. If you can time the market is a bonus.