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The Zacks Analyst Blog Highlights NVIDIA, Micron, Taiwan Semiconductor Company, Advanced Micro Devices and Texas Instruments

·5-min read

For Immediate Release

Chicago, IL – August 11, 2022 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: NVIDIA NVDA, Micron MU, Taiwan Semiconductor Company TSM, Advanced Micro Devices AMD and Texas Instruments TXN.

Here are highlights from Thursday’s Analyst Blog:

Semiconductor Stocks Plunge: Buy, Sell or Hold?

This week has been a really bad one for semiconductor stocks, as first NVIDIA and then Micron announced that they were cutting their outlooks.

NVIDIA put down its miss versus projections (and it was a huge 17.3% miss) to softness in the gaming business, which it said was because of lower sales at channel partners affected by macroeconomic concerns. Worse, CEO Jenseng Huang warned: "As we expect the macroeconomic conditions affecting sell-through to continue, we took actions with our Gaming partners to adjust channel prices and inventory."

What that boils down to then is slowing demand for discretionary items, as well as devices (PCs, smartphones, gaming devices, etc.). That could be first, because some of that spend has been diverted to services and the "opening up" economy, especially because people have bought a lot in the last 1-2 years and don't need more of the devices right now. And second, because there really is a problem called inflation that despite all the stimulus cash, is beginning to hurt some customers.

This softening in demand could be a signal that the economy is going where the Fed intended. Only, as far as these fabless semiconductor companies are concerned, they are seeing increased costs because of supply chain issues and the Taiwan-China-US tension isn't helping things at all.

If anything, there's a lot of concern about the future of chip supply given Taiwan's leading position there. Taiwan Semiconductor Company is seeing more demand than it can fill, and being a manufacturer, is in a position to keep raising prices. Its customers, like NVIDIA are getting squeezed (seen from the more than 20 bps miss on the gross margin). 

It is not too much of a stretch to think that the softness in crypto is also affecting NVIDIA, as it isAdvanced Micro Devices. And like AMD, NVIDIA is saying that supply chain issues are leading to softer-than-expected growth in the data center, which is nevertheless still growing very strongly.

Micron followed soon after NVIDIA with an announcement of its own that macroeconomic conditions had materially deteriorated, leading to softening demand for its DRAM and NAND memory chips since its call on Jun 30. Additionally, it expects the adverse conditions to continue, posing significant challenges in the next two quarters. Capex is also being cut as a result.

Expectedly, the entire segment is in the red since then, with chipmakers including AMD, NVDA, QCOM, MU, TSM, AMAT, INTC all selling off.

Recommendations

As is probably obvious from the above discussion, the semiconductor segment is not a good place to put your money in right now. In the case of companies like NVIDIA, Qualcomm, Micron and AMD, you will likely find a better entry point because things look to be headed down before they move up again. Intel is in a long-term bind and is not recommended any time in the near future. Therefore, selling Micron, AMD and NVDA instead sounds like a good plan.

There are a couple of stocks that stand out however.

TSM is one that benefits by virtue of being a low-cost manufacturer and despite all fabless players looking desperately to diversify their supply chains, these things take time. So in the meantime, TSM is the only hope for many, especially given its prowess at the leading edge.

Another stock that is usually a good defensive play isTexas Instruments. The fact that it has its own fabs and relatively low exposure to Asian manufacturing is an added advantage.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
 
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
 
Micron Technology, Inc. (MU) : Free Stock Analysis Report
 
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
 
Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report
 
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