After witnessing booming demand amid global supply chain issues during the pandemic, the semiconductor industry is facing a slowdown. The world chip sales growth has fallen for six straight months. Despite strong government support, many chipmakers have slashed billions of dollars off their planned capital expenditure due to shrinking consumer demand.
The inflationary pressures and fears of a recession have slumped the demand for semiconductors from electronics, automotive, and other sectors for the second consecutive month in August.
Moreover, earlier this month, the government instructed NVIDIA Corporation (NVDA) and Advanced Micro Devices, Inc. (AMD) to halt shipments of several artificial intelligence computing chips to China as a part of a technological crackdown on Beijing amid tensions in Taiwan. According to Reuters, the Biden administration plans to hit China with broader curbs on U.S. shipments of semiconductors used for artificial intelligence and chipmaking tools.
Furthermore, the global semiconductor revenue is expected to decline by 7.4% in 2022 compared to a 26.3% increase last year. With slowing consumer demand, this revenue decline will likely continue through 2023, with semiconductor revenues projected to decline 2.5% in the year.
Given the industry’s bleak outlook, it could be wise to sell fundamentally weak chip stocks Advanced Micro Devices, Inc. (AMD) and Marvell Technology, Inc. (MRVL) before they fall further.
Advanced Micro Devices, Inc. (AMD)
AMD operates as a global semiconductor company in Computing and Graphics; and Enterprise, Embedded, and Semi-Custom. It serves original equipment manufacturers, public cloud service providers, original design manufacturers, independent distributors, online retailers, and add-in-board manufacturers.
AMD’s non-GAAP operating expenses increased 71.8% year-over-year to $1.56 billion for the second quarter ended June 25, 2022. Its operating income amounted to $526 million, registering a decline of 36.7% year-over-year, while its net income decreased 37% year-over-year to $447 million. The company’s EPS decreased 53.4% year-over-year to $0.27 for the same period.
Street expects AMD’s EPS to decrease 3.2% year-over-year to $1.09 for the fiscal first quarter ending March 31, 2023. The stock has declined 46.2% year-to-date to close the last trading session at $77.45.
AMD’s POWR Ratings reflect its poor prospects. It has an overall D rating, which equates to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AMD has a D grade for Stability. It is ranked #81 of 94 stocks in the Semiconductor & Wireless Chip industry. Click here to see the other ratings of AMD for Growth, Value, Momentum, Sentiment, and Quality.
Marvell Technology, Inc. (MRVL)
MRVL is engaged in designing, developing, and selling integrated circuits and other infrastructure semiconductor solutions. The company’s offerings cater to five markets: data center, carrier infrastructure, enterprise networking, consumer, and automotive/industrial.
MRVL’s operating expenses increased 17% year-over-year to $746.90 million for the fiscal second quarter ended July 30, 2022. The company’s total liabilities stood at $6.63 billion, compared to $6.41 billion for the fiscal year ended January 29, 2022. Its current liabilities increased 55.2% to $2.15 billion, compared to $1.38 billion for the fiscal year ended January 29, 2022.
The stock has lost 44.7% year-to-date to close the last trading session at $48.41.
MRVL’s POWR Ratings reflect weak prospects. The stock has an overall rating of D, which equates to a Sell in our proprietary rating system.
It has a D grade for Value, Stability, and Quality. Within the same industry, it is ranked #83. To see the other ratings of MRVL for Growth, Momentum, and Sentiment, click here.
AMD shares were trading at $76.50 per share on Thursday afternoon, down $0.95 (-1.23%). Year-to-date, AMD has declined -46.84%, versus a -16.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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