Once a driving force behind the market rally, semiconductor stocks have faltered, down 3% since the election. Nvidia earnings report on Wednesday is set to be a litmus test for the sector’s outlook.
- Sector struggles:
- Chip stocks, including Nvidia’s peers, have dragged on markets in the second half of 2024.
- The PHLX Semiconductor Index (^SOX) hit a two-month low earlier this week.
- Nvidia’s pivotal role:
- Nvidia stock has soared nearly 200% this year and over 1,100% in two years.
- Analysts are focused on Nvidia’s forward guidance, seen as critical for sustaining optimism.
- Despite challenges, the company has rebounded 45% since its August low.
- Industry-wide declines:
- Smaller chipmakers like Super Micro Computer (SMCI), Qorvo (QRVO), and Mobileye Global (MBLY) are down 40% or more this year.
- Industry giants, including Intel (INTC), Micron (MU), and AMD, have suffered double-digit losses.
- Market implications:
- The broader US stock rally has diversified beyond chip stocks, with the S&P 500 (^GSPC) up by the same measure chip stocks are down.
- Tech (XLK) has become one of the weakest sectors since Q2, second only to healthcare.
- Analysts weigh in:
- Nvidia is seen as “priced to perfection,” making Wednesday’s earnings critical for market sentiment.
- Tom Essaye of Sevens Report expressed optimism, citing Nvidia’s track record of meeting high expectations.
The semiconductor sector’s performance is at a critical juncture. Nvidia’s earnings and guidance could either reinvigorate the industry or underscore its waning influence in the broader bull market. Investors are watching closely as the stakes for the sector’s future remain high.
