U.S. chip stocks continued their losing streak on Wednesday, as Wall Street’s primary semiconductor benchmark fell from all-time highs after the industry had its best year since 2009, when it recovered from the financial crisis.
The PHLX semiconductor index dropped 2.1%, with the biggest losses being in Advanced Micro Devices, Qualcomm, and Broadcom, all of which had drops of more than 2%.
Since closing on December 27, when the chip index reached a record high, it has already decreased by over 7%.
The fall in semiconductor stocks this week has coincided with a general downturn on Wall Street as investors wait for the Federal Reserve’s December meeting minutes, which are expected later on Wednesday, to provide insight into the organization’s future interest rate path.
Expectations that the Fed would lower interest rates this year and the euphoria surrounding artificial intelligence have contributed to the PHLX’s 65% gain in 2023, which is the most since 2009. In contrast, the Nasdaq and S&P 500 had yearly increases of 43% and 24%, respectively.
Bets that the worldwide demand slump of last year, which caused memory chip manufacturers to reduce production, has basically bottomed out have also helped semiconductor stocks.
Regarded as the leading supplier of processors for artificial intelligence, Nvidia had its stock market value more than treble to $1.2 trillion in 2023, placing it as the sixth most valuable business on Wall Street. On Wednesday, it fell by about 1%.
Analyst Vivek Arya of BofA Global Research suggested investing in cloud computing and automobiles through companies such as Nvidia, Marvell Technology, NXP Semiconductors, and ON Semiconductor in a client note. In order to expose investors to the growing complexity of chip designs, Arya also suggested firms such as KLA Corp and Arm Holdings.
Additionally, Wells Fargo analyst Joe Quatrochi stated that he believes chip equipment sellers would have a subdued rebound in 2024 and recommended KLA and Applied Materials as strong investments in that sector.