FedEx (FDX-US) has slumped again after warning of a global recession, which may lure some investors into chip stocks, but Barron’s Business Week columnist Tae Kim thinks it’s not a good idea.
Two major chip stocks, Intel (INTC-US) and Nvidia (NVDA-US) shares fell 45% and 55% respectively so far this year, shocked by the FedEx news, and even hit a 52-week low in intraday Friday (16th), but eventually reversed and closed up 1.39% and 2.08%, respectively.
While chip stocks slid, they fell justifiably, and recent developments suggest that business trends are getting worse and show no signs of improving, which means more downside may lie ahead.
Importantly, even if the stock price declines, stocks will become more expensive on a price-to-earnings basis if the outlook for corporate earnings declines, and the latest wave of data from chip companies has been less than ideal.
Nvidia warned two weeks ago that new U.S. government rules on the export of artificial intelligence (AI) chips to China could cost the company up to $400 million in business losses.
A week later, a senior executive at Samsung Electronics Co., the world’s largest memory chip maker, said that customer demand for its chips could take longer than the company initially expected heading into next year.
Then at this week’s technical conference, Witton Electronics (WDC-US) and Seagate (STX-US) executives said business conditions were still deteriorating and cloud customers were cautious. The two companies had slashed their profit forecasts in the past few weeks.
Ultimately, Intel Chief Executive Pat Gelsinger also said at a conference last week that “things are pretty bad” and that business conditions may be “more difficult” after issuing guidance on the second-quarter earnings call in late July. a little worse.”
Demand for tech products did not appear to be improving, as retailers and the second-hand market made cautious comments that pricing for processors, memory chips and graphics cards continued to be weak. The semiconductor industry seems to be about to be shrouded in darker and darker clouds, and there is still no clear sky.