The semiconductor sector is currently experiencing a notable selloff, extending its fourth consecutive loss following an exceptional year in 2023. The PHLX Semiconductor Index (SOX) has dropped by 1.8%, with almost all of its 30 components losing value. Among the biggest decliners in this sector are Wolfspeed Inc. (WOLF) with a decrease of 5.6% and On Semiconductor Corp. (ON) with a loss of 3.6%. Advanced Micro Devices Inc.’s stock (AMD) has seen a decline of 2.3% and shares of sector leader Nvidia Corp. (NVDA), the fifth largest U.S. company with a market capitalization of $1.18 trillion, have also diminished by 0.8%. However, Micron Technology Inc.’s stock (MU) managed to make a slight gain of 0.2%.
Looking ahead, BofA Securities analyst Vivek Arya remains optimistic about the SOX in 2024, even after its impressive 65% surge in 2023, which marks its fourth-best yearly performance in the last three decades. Despite potential challenges such as increased volatility due to rising interest rates, geopolitical tensions between the U.S. and China, as well as supply-demand issues, there are several positive factors that could drive the sector’s growth. These include sustained investment in artificial intelligence (AI) infrastructure, the growing complexity of chip design, the continuous proliferation of automotive chip content, and government initiatives focused on public investment.
As it stands, the SOX has witnessed a 6.2% decline during its current four-day losing streak. This downward trend began after reaching a record high of 4,214.59 on December 27th, highlighting the recent challenges faced by the semiconductor sector.
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