: Chip stocks could suffer worst year ever as effects of shortage-turned-glut spread

by | Oct 11, 2022 | Stock Market

Chip stocks sold off again Tuesday with havens within the battered semiconductor industry disappearing as the effects of a supply glut spread following a years-long shortage. The PHLX Semiconductor Index
fell nearly 4% Tuesday to close at a loss of 2.5% to close at 2,218.49, its lowest finish since Oct. 2, 2020, dragged down by shares of its largest component by market cap. U.S. shares of Taiwan Semiconductor Manufacturing Co.
which fell as much as 7% to finish down 5.9% at $63.45, following a Digitimes report that customers are already beginning to cancel slots.

Chip stocks started their overall dive Friday, with the SOX index down 12% since the announcement of widened restrictions on what U.S. chip makers can sell to China, potentially disrupting non-U.S. parts of the sector that may have manufacturing sites in China. Read: Chip stocks crushed to two-year low as more tech, AI ban to China add to woes Chip stocks have dropped nearly 44% collectively in 2022, putting them on a dangerous trajectory with nearly three months left in the year. The worst years on the SOX index were 2002 and 2008, when it finished the year down 44.6% and 48%, respectively, according to FactSet data. And there could be more shoes to drop for the chip industry. While much of the downturn has landed on the shoulders of big-name companies focused on consumer electronics — including Nvidia Corp.
Intel Corp.
and Advanced Micro Devices Inc.
— investors have found safety in other sectors that have not fallen off, but at least one analyst thinks those safe havens could be growing dangers as well. In a Tuesday note titled “Analog Party Over,” Citi Research analyst Christopher Danley cut his estimates on Texas Instruments Inc.
NXP Semiconductors NV
and Microchip Technology Inc.
Danley said he favors Analog Devices Inc.
which was one of the first analog chip makers to indicate weaker-than-expected demand. Until recently, analog chips, or those lower-tech microprocessors that a …

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