Results for: Semiconductors

Paramount Global shares rose slightly after announcing CEO Bob Bakish’s resignation and appointing an ‘office of the CEO.’ Chegg declined over 7% due to a CEO change and disappointing revenue guidance. NXP Semiconductors gained 5% on strong earnings per share, while Amkor Technology advanced nearly 7% after beating earnings and revenue expectations. Medifast plunged over 17% on weak guidance, and F5 fell 9% on disappointing revenue projections. Coursera shares dropped 15% on lowered revenue estimates, while Woodward rose 6% on exceeding revenue expectations. Sensata Technologies soared 17% after surpassing expectations and announcing CEO Jeff Cote’s retirement.

European semiconductor manufacturer STMicroelectronics downgraded its sales outlook for the year citing dwindling demand from automotive, laptop, and phone sectors. The company reported lower-than-expected first-quarter results, with revenue falling 18% to $3.46 billion. STMicroelectronics’ cautionary outlook reflects the broader trend of challenges faced by the semiconductor industry due to reduced demand from automakers and a decline in orders from electronic device companies. Investors remain cautious amid economic uncertainties and rising geopolitical tensions.

The Micron Technology chip production plant in Clay, New York, promises economic benefits but raises environmental concerns. The facility will use hundreds of toxic chemicals, including PFAS, which can threaten water quality and human health. Despite Micron’s commitment to wastewater treatment, there are concerns about the potential for spills and the lack of water quality standards for PFAS. The community must demand ultra-secure handling and treatment of chemicals to protect the environment and workers from the potential health hazards associated with the semiconductor industry.

Baird has adjusted Texas Instruments’ (NASDAQ: TXN) financial outlook, increasing the semiconductor company’s price target to $175 from the previous $125. Despite this significant increase, Baird maintains a Neutral rating on the stock due to concerns about potential risks in the semiconductor industry, particularly around pricing dynamics. The firm acknowledges that inventory levels across the sector have hit record highs, but suggests that pricing may not be at immediate risk. Baird notes that the second quarter revenue guidance for Texas Instruments appears to be following normal seasonal trends, indicating some stabilization in end demand. However, the outlook for the second half of the year is critical, especially in terms of how it will impact inventory levels within the industry.

Intel’s upcoming AI chip, Gaudi 3, is expected to drive significant revenue growth for three major semiconductor companies: TSMC, Alchip, and Wistron. Morgan Stanley predicts that TSMC will produce the chips using its advanced 5-nanometer process, while Alchip will provide design services and Wistron will supply the baseboards. The financial institution forecasts shipments of 300-400k units by 2025, generating up to $3 billion for Intel. TSMC and Alchip are viewed as long-term winners in the AI semiconductor demand. The news has positive implications for Intel’s stock, which has been consolidating in recent months.

The stock market experienced a downturn last week, with AI stocks taking a hit. Nvidia Corporation (NASDAQ: NVDA) dropped significantly, despite the absence of negative data points related to AI. The company’s Neutral investment thesis remains upheld, as the stock exhibited excessive growth during its rally to $974. Positive AI Data Points To clarify the sudden decline, it’s crucial to note that AI-related data points from last week were not negative, contrary to market interpretation. Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) projected strong growth rates of over 20% in 2024 due to high AI demand. While the foundry acknowledged a slowdown in overall chip demand, TSMC attributed this primarily to traditional server CPU chip demand, which favors chip production for Nvidia over Intel (INTC). Super Micro Computer (SMCI) announced its FQ3 ’24 earnings call without providing guidance updates. However, this does not necessarily indicate a negative signal for AI GPU demand, as the company has not consistently provided guidance updates in the past. Paying the Right Price Nvidia was previously identified as aggressively priced at over $600, leading to recommendations for investors to exit their positions. The stock has since surged to $974, indicating an irrational appetite for AI investments that is now fading. Nvidia’s forecasted sales for FY25 (2024) are $112 billion, projected to exceed $160 billion by FY27. While the company’s sales growth rates are expected to normalize, the FQ1 ’26 sales growth forecast is estimated to drop below 30%. Margins and Operating Expenses Nvidia faces the potential for margin compression in the future. The company’s FQ1 ’25 gross margins were projected at 76.3% to 77.0%, with limited quarterly operating expenses of $2.5 billion. Over time, Nvidia will likely need to invest more to maintain profitability. The operating expense base below 10% of revenues also appears unsustainable. During FY23, before the AI GPU chip sales surge, Nvidia spent nearly $7 billion on opex, which amounted to over 25% of revenues. If this trend continues, Nvidia’s opex will rise significantly. Takeaway Despite the recent market downturn, the AI boom is not ending. The market is taking profits on Nvidia, and further declines are possible during the digestion period. Investors are advised to let the stock slip further, potentially back to the $600 range, to mitigate the risk of inevitable margin pressures.

Seagate Technology (NASDAQ: STX) reported mixed results for its fiscal first quarter of 2024, meeting revenue estimates but exceeding earnings expectations. The data storage company’s revenue declined by 11% year-over-year to $1.66 billion, slightly below analysts’ estimates. However, Seagate’s non-GAAP earnings per share (EPS) of $0.33 came in significantly ahead of consensus, marking an improvement from a loss per share of $0.28 in the same quarter last year.

US exports to China fell by 4.3% last year to $144.9 billion, due in part to policy changes and China’s economic slowdown. The US-China Business Council emphasized the importance of considering the geopolitical implications of trade policy decisions and the potential consequences for US sectors such as agriculture. Despite the decline, oilseeds and grains remained the top exports to China, while semiconductor and travel services exports dropped significantly.

Despite Broadcom’s revised cloud licensing practices, critics argue that underlying concerns, such as price increases, unfair terms, and product bundling, remain unresolved. The company maintains it offers more customer choice, while critics urge antitrust regulators to investigate. Amidst these developments, Oppenheimer analyst Rick Schafer remains optimistic, citing Broadcom’s strong position in the semiconductor industry and potential benefits from growing demand for data center artificial intelligence.

Impinj, a leading RFID manufacturer, will report its Q1 earnings tomorrow afternoon. Analysts predict a 14.3% year-over-year revenue decline to $73.58 million, along with adjusted earnings per share of $0.11. While Impinj has historically exceeded expectations, the current market volatility within the semiconductors sector could impact its performance. Investors should also note the recent earnings results of Impinj’s peers, such as SMART (down 26.7%) and Micron Technology (up 57.7%).