Followers | 680 |
Posts | 141062 |
Boards Moderated | 36 |
Alias Born | 03/10/2004 |
Wednesday, April 27, 2022 1:06:46 PM
By: Motley Fool | April 27, 2022
• It's not just Nvidia. Chip stocks in general remain "uninvestable."
What happened
Semiconductor stock Nvidia (NVDA 0.12%) suffered its second down day in a row on Wednesday, falling 3.5% through 10:30 a.m. ET.
You can blame investment bank Evercore ISI for that.
So what
In a note covered by Marketwatch Wednesday morning, Evercore ISI analyst C.J. Muse blasted the entire semiconductor sector as "almost uninvestable today" -- and warned that this situation could persist into the second half of 2022.
What's wrong with chip stocks, you ask? Basically, the story goes like this: Business is booming in the semiconductors sector, and most folks expect it to keep booming about as far out as anyone is willing to make projections. Last quarter alone, Nvidia reported 53% sales growth -- and 106% growth in profits! (Yes, you read that right. Profit growth was literally twice as fast as sales growth.)
And the good times should keep on rolling, with analysts forecasting 42% earnings growth for Nvidia in its upcoming Q1 report due out next month, then an uninterrupted string of improving earnings all the way out to at least 2027 -- by which point Nvidia could be earning nearly $9 a share, according to predictions compiled by S&P Global Market Intelligence, or more than twice what it earned last year.
Again, what's wrong with any of that? Well, in a nutshell, it's this: A big part of the reason sales and profits are booming is because there's a global semiconductor shortage that's incentivizing companies to buy up semiconductor supplies wherever they can find them, and at almost any price. (Jefferies cites an example of "desperate customers pay[ing] $200 for a $1-2 part.")
Problem is, this can result in excess inventories, as customers hoard semiconductors on the assumption there will be demand for the products that need semiconductors. If that demand suddenly evaporates (say, because no one wants to mine cryptocurrency anymore, or because China shuts down its factories in an attempt to contain the coronavirus), then companies could end up stuck with unneeded chips -- and the semiconductor deficit transforms into a semiconductor glut.
Now what
Analysts are forecasting that this might happen in the second half of 2022, when a slowdown in PC demand is expected. And hearing this, investors are naturally hesitant to buy semiconductor stocks until they know for sure if the slowdown will arrive and semiconductor companies like Nvidia will have to reduce estimates.
This is why the stocks are considered "uninvestable" -- at least until that shoe drops in the second half of the year. It's why, despite huge projections for future growth, investors are reluctant to buy Nvidia -- and they may be right to worry.
But here's the thing: No matter what happens in 2022, if you look out a few years, Nvidia still predicts it has a $1 trillion market opportunity ahead of it, and the only way to participate in that opportunity is to buy the stock. In attempting to time the market, and only buy after the feared drop, investors run the risk of missing out on an even bigger opportunity farther down the road.
Read Full Story »»»
DiscoverGold
Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Caveat emptor!
• DiscoverGold
Recent NVDA News
- NVIDIA Sets Conference Call for First-Quarter Financial Results • GlobeNewswire Inc. • 05/01/2024 09:00:00 PM
- Philips Stocks Soar 47% Following US Deal, Tesla Bolsters Presence in China, and More News • IH Market News • 04/29/2024 11:11:24 AM
- BHP Bids $38.8 Billion for Anglo American; Biden Unveils Historic Micron Technology Deal, and More News • IH Market News • 04/25/2024 11:48:40 AM
- Apple Loses Market Share in China, GM Surges in Pre-Market Following Upward Revisions for 2024 Projections, and More News • IH Market News • 04/23/2024 11:25:34 AM
- U.S. Index Futures Surge While Wall Street Eyes Rebound on Earnings Focus, Oil Prices Slip • IH Market News • 04/22/2024 12:09:47 PM
- Li Auto Stock Drops 7.3% Amid Tesla Price Cuts, Salesforce Retreats from Informatica Deal, and Other Market Updates • IH Market News • 04/22/2024 12:09:21 PM
- Nasdaq, S&P 500 Extend Losing Streaks On Tech Weakness But Dow Advances • IH Market News • 04/19/2024 08:32:14 PM
- Traders May Make Another Attempt At Bargain Hunting • IH Market News • 04/18/2024 01:14:37 PM
- Apple to Invest $250 Million in Singapore Expansion, Oracle Commits $8 Billion to Japan Infrastructure, and More News • IH Market News • 04/18/2024 11:11:52 AM
- United Shares Surge 5.3% in Q1 2024 Earnings Beat; Take-Two Cuts 5% of Workforce, and More News • IH Market News • 04/17/2024 10:57:39 AM
- Delta Generates US$37 Million Profit in Q1, Google and Intel Unveil Cutting-Edge AI Chips, and More News • IH Market News • 04/10/2024 11:13:48 AM
- U.S. Stocks May Move Back To The Upside In Early Trading • IH Market News • 04/05/2024 01:10:21 PM
- Apple Terminates 614 Employees, Disney Unveils June Crackdown on Password Sharing, and More Updates • IH Market News • 04/05/2024 11:38:57 AM
- U.S. Stocks Close Sharply Lower Following Late-Day Sell-Off • IH Market News • 04/04/2024 08:34:37 PM
- Cal-Maine Surges on Strong Quarterly Performance, Taiwan Earthquake Disrupts Tech Supply Chain, and More • IH Market News • 04/03/2024 11:12:20 AM
- GameStop Shares Tumble 20% in Pre-Market Trading Amid Revenue Decline, Direct Digital Plummets 42%, and More News • IH Market News • 03/27/2024 10:54:47 AM
- Tech Sector Weakness May Weigh On Wall Street • IH Market News • 03/25/2024 01:26:54 PM
- U.S. Stocks Close Mixed On The Day But Sharply Higher For The Week • IH Market News • 03/22/2024 08:40:00 PM
- Looming Fed Announcement May Lead To Choppy Trading On Wall Street • IH Market News • 03/20/2024 01:16:55 PM
- U.S. Index Futures Trade Sideways Amid Anticipation of Fed’s Policy Update; Oil Prices Dip • IH Market News • 03/20/2024 11:17:32 AM
- JPMorgan boosts dividends, Chipotle unveils 50:1 stock split, and Latest News • IH Market News • 03/20/2024 11:15:48 AM
- U.S. Stocks Show Notable Turnaround Amid Rebound By Nvidia • IH Market News • 03/19/2024 08:35:13 PM
- Futures Pointing To Initial Pullback On Wall Street • IH Market News • 03/19/2024 01:22:58 PM
- Unilever Initiates Ice Cream Division Spin-Off and Announces Job Cuts; Berkshire Ramps Up Share Buyback Efforts, and More • IH Market News • 03/19/2024 11:33:10 AM
- US Index Futures Decline Ahead of Federal Reserve Meeting, Oil Prices Retreat • IH Market News • 03/19/2024 11:27:29 AM
NanoViricides Reports that the Phase I NV-387 Clinical Trial is Completed Successfully and Data Lock is Expected Soon • NNVC • May 2, 2024 10:07 AM
ILUS Files Form 10-K and Provides Shareholder Update • ILUS • May 2, 2024 8:52 AM
Avant Technologies Names New CEO Following Acquisition of Healthcare Technology and Data Integration Firm • AVAI • May 2, 2024 8:00 AM
Bantec Engaged in a Letter of Intent to Acquire a Small New Jersey Based Manufacturing Company • BANT • May 1, 2024 10:00 AM
Cannabix Technologies to Deliver Breath Logix Alcohol Screening Device to Australia • BLO • Apr 30, 2024 8:53 AM
Hydromer, Inc. Reports Preliminary Unaudited Financial Results for First Quarter 2024 • HYDI • Apr 29, 2024 9:10 AM