The chip industry has been under pressure this year due to economic uncertainties such as rising inflation, aggressive rate hikes by the Fed, geopolitical issues causing supply chain disruptions, and material shortages.
The pressure on the industry has been further worsened by recent regulatory action taken by the United States to curb chip export to China.
In addition, the global semiconductor market, which was previously upended by the COVID-19 pandemic, and then the macroeconomic headwinds, is projected to drop 3.6% in revenue in 2023 amid poor consumer demand and a weakening economy.
Furthermore, technology research group Gartner forecasted that the revenue of dynamic random access memory (DRAM), used in personal computers, workstations, and servers, will decrease by 2.6% in 2022, and 18% in 2023.
Given this backdrop, it would be wise to avoid fundamentally weak chip stocks NVIDIA Corporation (NVDA), Advanced Micro Devices, Inc. (AMD), Marvell Technology, Inc. (MRVL), and Navitas Semiconductor Corporation (NVTS) now.
NVIDIA Corporation (NVDA)
NVDA is a global provider of graphics, computation, and networking solutions. The company operates through two segments: Graphics and Compute & Networking. The company’s products are used in gaming, professional visualization, datacenter, and automotive markets.
In September, the U.S. government blocked NVDA from exporting two of its top computing chips, A100 and H100 graphic processing units, to China for artificial intelligence (AI) work. The company said it had booked $400 million in sales of the affected chips to China that could be lost if firms decide not to buy alternative NVDA products.
For the fiscal third quarter ended October 30, NVDA’s revenue came in at $5.93 billion, down 16.5% year-over-year. Its non-GAAP operating income came in at $1.54 billion, down 54.6% year-over-year. In addition, its non-GAAP net income came in at $1.46 billion, declining 51% year-over-year, while its non-GAAP EPS came in at $0.58, down 50.4% year-over-year.
Analysts expect NVDA’s EPS to decline 39.2% year-over-year to $0.80 for the fiscal fourth quarter ending January 2023. Its revenue is expected to decrease 21.3% year-over-year to $6.02 billion for the same quarter.
Over the past year, the stock has lost 45.9% to close the last trading session at $166.10. It has lost 43.5% year-to-date.
This bleak outlook is reflected in NVDA’s POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system.
NVDA has a D grade for Growth, Stability, and Value. Within the Semiconductor & Wireless Chip industry, it is ranked #82 out of 93 stocks.
Click here for the additional POWR Ratings for NVDA (Momentum, Sentiment, and Quality).
Advanced Micro Devices, Inc. (AMD)
AMD operates as a global semiconductor company through its Computing and Graphics; and Enterprise, Embedded, and Semi-Custom segments. It serves OEMs, public cloud service providers, original design manufacturers, independent distributors, and online retailers.
On November 17, AMD and Analog Devices, Inc. (ADI) announced that they had resolved all their ongoing patent litigations based on mutually agreed-upon terms and committed to pursuing technology collaborations.
For the third quarter that ended September 24, AMD’s net income came in at $66 million, down 92.8% year-over-year. In addition, its non-GAAP operating expenses increased 46.9% year-over-year to $1.52 billion, while its non-GAAP earnings per share came in at $0.67, down 8.2% year-over-year.
AMD’s revenue is expected to decrease 4.2% year-over-year to $5.64 billion for the quarter ending March 2023. Its EPS is expected to fall 37.1% year-over-year to $0.71 for the same quarter.
Over the past year, the stock has lost 48.9% to close the last trading session at $73.62. It has lost 8.3% over the past three months.
AMD’s POWR Ratings reflect its poor prospects. It has an overall F rating, which represents a Strong Sell.
The stock has an F grade for Stability and a D for Growth, Sentiment, and Quality. Within the same industry, AMD is ranked #90.
Click here to access the additional POWR Ratings for AMD (Value and Momentum).
Marvell Technology, Inc. (MRVL)
MRVL designs, develops, and markets analog, mixed-signal, digital signal processing, embedded, and standalone integrated circuits. The company offers Ethernet solutions and storage products.
It was reported that Marvell was eliminating some roles in China as part of a realignment of its global research and development investments.
For the fiscal third quarter ended October 29, MRVL’s total non-GAAP operating expenses increased 13.4% year-over-year to $420.40 million. Net cash used in investing activities rose 170.3% from the prior-year quarter to $51.9 million. MRVL’s total current liabilities came in at $2.42 billion for the period ended October 29, 2022, compared to $1.39 billion for the period ended January 29, 2022.
Its EPS is expected to decline 17.5% year-over-year to $0.43 for the fiscal first quarter ending April 2023. Analysts expect its revenue to amount to $1.40 billion for the same quarter, declining 2.9% year-over-year.
The stock has declined 27.1% over the past six months to close its last trading session at $42.97. It has fallen 50.9% year-to-date.
MRVL's overall D rating equates to Sell in our proprietary rating system. The stock also has a D grade for Stability. MRVL is ranked #78 in the Semiconductor & Wireless Chip industry.
Click here to see the additional POWR Ratings for MRVL for Growth, Value, Momentum, Sentiment, and Quality.
Navitas Semiconductor Corporation (NVTS)
NVTS designs, develops, and markets gallium nitride (GaN) power integrated circuits used in power conversion and charging. It operates in the United States, Ireland, Germany, Italy, Belgium, China, Taiwan, and the Philippines.
For the third quarter ended September 30, NVTS’s gross profit came in at $391K, down 85% year-over-year. In addition, its non-GAAP loss from operation increased 58.8% year-over-year to $10.27 million, while its non-GAAP net loss per share came in at $0.07.
The stock has declined 14.5% over the past three months to close its last trading session at $4.47. Moreover, the stock has fallen 73.7% year-to-date.
NVTS’s POWR Ratings reflect a bleak outlook. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
NVTS is rated a D for Value and Sentiment and an F for Stability and Quality. In the same industry, it is ranked #92.
To see additional POWR Ratings for Growth and Momentum for NVTS, click here.
NVDA shares rose $0.65 (+0.39%) in premarket trading Tuesday. Year-to-date, NVDA has declined -43.47%, versus a -14.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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