Investors looking for signs that the uptrend in the chip cycle might be ending haven't gotten that from first-quarter earnings reports so far. Still, semiconductor stocks remain out of favor amid concerns that the cycle could turn negative soon.
Semiconductor stocks posting beat-and-raise earnings reports for the March quarter include MaxLinear, Onsemi, Qualcomm, STMicroelectronics, Taiwan Semiconductor Manufacturing and United Microelectronics.
Meanwhile, several semiconductor stocks beat their quarterly targets but disappointed with their guidance for the current period. They included Intel and Texas Instruments.
Deutsche Bank analyst Ross Seymore said first-quarter earnings reports from semiconductor companies have been solid but their guidance has been mixed.
Macro Uncertainties Weigh On Chip Stocks
"Strength in most end markets was offset by macro uncertainties (inflation, supply issues, Covid, etc.)," Seymore said in a note to clients Friday. "Management tones remained generally confident in demand albeit with growing caution surrounding Covid-related shutdowns in China."
Chip shortages continue and supply-demand equilibrium is still not in view, Seymore said. "But the tightness appears to be easing slightly."
Fears about an impending cyclical peak persist, he said. That helps explain why semiconductor stocks haven't gotten much of a lift from beat-and-raise quarterly reports.
Automotive and communications chip sales grew more than expected in the first quarter. But PC chip sales have weakened.
Sentiment Terrible For Semiconductor Stocks
Mizhuo trading desk analyst Jordan Klein said investors are pessimistic about semiconductor stocks.
"Semi sentiment is terrible and positioning way down on fears of a cyclical slowdown and estimate cuts as consumer spending on handsets and PCs massively decelerate due to rising inflation and huge pull forward during Covid," Klein said in a note to clients Thursday.
The Covid-related factory shutdowns in China have worsened the situation by snarling the supply chain, he said.
"The majority of investors just want to hate semis right now," Klein said in a follow-up note Friday. "I remain cautious on almost all semis more due to cycle slowdown concerns and lack of visibility in consumer demand for Q3 onward."
Chip Shortages Impacting Numerous Industries
Companies reporting production issues related to chip shortages recently include consumer electronics firms Apple and Nintendo, telecom gear maker Nokia, and automakers Mercedes-Benz, Volvo and Volkswagen.
Intel Chief Executive Pat Gelsinger told CNBC on Friday that he expects the semiconductor industry to suffer chip shortages until 2024. He blamed constrained availability of key semiconductor manufacturing tools for the situation.
This week will see earnings reports from over 20 semiconductor stocks. Top chipmakers set to post March-quarter results include Advanced Micro Devices, Alpha & Omega Semiconductor, Monolithic Power Systems, Rambus and SiTime.
SOX Index Down Over 23%
Worldwide sales of semiconductors in the first quarter rose 23% year over year to $151.7 billion, the Semiconductor Industry Association announced Friday. Global sales for the month of March were $50.6 billion, an increase of 1.1% vs. the previous month, the trade group said.
Research firm Gartner predicts that worldwide semiconductor revenue will rise 13.6% to $676 billion in 2022. It forecasts 3.6% growth in semiconductor sales in 2023. Last year, semiconductor revenue jumped 26.3%, Gartner said.
The Philadelphia semiconductor index, known as SOX, rebounded 3.5% on Monday but is down 23.4% year to date. The SOX contains the 30 largest semiconductor stocks traded in the U.S.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
