Why AMD, Marvell, Intel and other chip stocks sank after Nvidia earnings
By Emily Bary
No one in the chip industry besides Nvidia sounds good, an analyst says
Chip stocks were among the biggest losers in Thursday's technology-sector selloff as Nvidia Corp.'s blowout results failed to drive the market higher amid a heated lead-up to the report.
While Nvidia shares finished Thursday's session ever-so-marginally in the black, peer names sold off sharply. Shares of Advanced Micro Devices Inc. (AMD) lost 7.0% on the day and sat among the S&P 500's SPX largest laggards.
Momentum for Nvidia (NVDA) can be viewed in different ways for the rest of the chip industry. While AMD and others have their own AI chips and the potential to benefit from similar tailwinds as those businesses ramp up, Nvidia is far ahead in the artificial-intelligence market.
Read: Why Nvidia's AI bonanza may have only just begun
For some names, Nvidia's eye-popping revenue forecast and its talk of strong visibility into future demand could be reinforcing a Wall Street fear that spending on AI hardware is eating away at budget share for more traditional chips, something Intel Corp.'s (INTC) management acknowledged in that company's most recent report.
There could be "some share losses for companies like Intel, legacy providers that were really not AI friendly or AI heavy," said Tejas Dessai, a research analyst at Global X, which provides thematic exchange-traded funds.
Intel shares were off 4.1% in Thursday trading.
Other notable laggards were Marvell Technology Inc. (MRVL) and Super Micro Computer Inc. (SMCI), down 6.9% and 5.4%, respectively. Marvell's stock was down another 3% in Thursday's after-hours action following its own earnings report.
The PHLX Semiconductor Index SOX was down 3.4% on the day.
Mizuho analyst Jordan Klein told MarketWatch in an email that the backdrop for semiconductors is "not great" lately, as "no one" besides Nvidia sounds good. Case in point: Analog Devices Inc. (ADI) gave downbeat guidance Wednesday morning, but its stock still ended that session slightly higher as it got swept up "in the rally that was really all [Nvidia] excitement vs. anything else."
Chip stocks have been on a weak trend over the past three weeks and are "back on that path as [Nvidia was] not enough in many folks' minds," Klein said.
But Global X's Dessai was optimistic, calling Nvidia's commentary as bullish for the sector and indicative of the long-term potential stemming from an AI wave.
"All of tech is taking a beating today," he said, not just chip stocks. In his view, Nvidia's report is a "sign of very bullish times for the semiconductor value chain."
There are "hundreds of billions of dollars worth of computational infrastructural inside data centers that are up for replacement in the new computing paradigm" he said. "I don't necessarily believe the rest of the semiconductor value chain is disadvantaged."
-Emily Bary
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08-24-23 1650ET
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