Semiconductor Stocks Soar To All-Time Highs: On Track For Strongest Year Since 2008, But Are They Too Expensive Now?
Portfolio Pulse from Piero Cingari
The semiconductor industry, tracked by the iShares Semiconductor ETF (SOXX), has seen a 66% increase in 2023, reaching new all-time highs. The VanEck Semiconductor ETF (SMH) and companies like Nvidia (NVDA), AMD, Broadcom (AVGO), Lam Research (LRCX), Intel (INTC), Monolithic Power Systems (MPWR), and Micron Technology (MU) have also seen significant gains. However, concerns arise as the SOXX ETF shows overbought signals and semiconductor stocks trade at high valuations, with some trading at over 50 times forward earnings. Analysts' price targets suggest that the expected growth may already be priced in.
December 26, 2023 | 4:48 pm
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NEGATIVE IMPACT
AMD's stock is up 119% this year, but with a P/E ratio of 42.7x and a negative median target percentage, it may face a price adjustment.
AMD's high P/E ratio and the fact that its median price target is below the current price could lead to a negative short-term price movement.
CONFIDENCE 70
IMPORTANCE 80
RELEVANCE 85
NEGATIVE IMPACT
Broadcom's 101.4% increase this year is impressive, but with a P/E of 23.9x and a negative target percentage, it might see a correction.
Despite strong performance, Broadcom's valuation and negative median target percentage suggest that the stock may be due for a short-term price decline.
CONFIDENCE 70
IMPORTANCE 75
RELEVANCE 80
NEGATIVE IMPACT
Intel's 89% increase this year is notable, yet with a P/E of 28.8x and a negative median target percentage, the stock may face downward pressure.
Intel's stock may experience a short-term decline as its current P/E ratio and negative median target percentage may lead to investor skepticism.
CONFIDENCE 65
IMPORTANCE 70
RELEVANCE 75
NEGATIVE IMPACT
Lam Research's 89% gain aligns with the sector's growth, but its forward P/E and potential overvaluation could lead to a price dip.
Lam Research's significant gain may be tempered by market corrections if investors consider the stock overvalued based on its forward P/E ratio.
CONFIDENCE 65
IMPORTANCE 70
RELEVANCE 75
NEGATIVE IMPACT
Monolithic Power Systems has grown 79%, but as one of the most expensive stocks in the sector, it's at risk of a price correction.
Monolithic Power Systems' high valuation could lead to a price correction if investors decide to sell off stocks they perceive as too expensive.
CONFIDENCE 75
IMPORTANCE 85
RELEVANCE 85
NEGATIVE IMPACT
Micron Technology's 75% rise and high P/E ratio suggest it may be overvalued, potentially leading to a short-term price decline.
Micron Technology's stock may face a downturn as its high P/E ratio could prompt investors to reassess the sustainability of its current price.
CONFIDENCE 70
IMPORTANCE 80
RELEVANCE 85
NEGATIVE IMPACT
Nvidia has seen a 240% gain in 2023, leading the S&P 500, but its high valuation raises questions about sustainability of its stock price.
Nvidia's exceptional performance may be at risk of a downturn if investors perceive its current valuation as too high and decide to lock in profits.
CONFIDENCE 75
IMPORTANCE 95
RELEVANCE 95
NEGATIVE IMPACT
The VanEck Semiconductor ETF (SMH) has seen a 74% rise, driven by its heavy weighting in Nvidia, but may face similar overvaluation concerns as SOXX.
SMH's significant gain, partly due to Nvidia's success, could be subject to a correction if investors deem the sector overvalued and decide to take profits.
CONFIDENCE 75
IMPORTANCE 85
RELEVANCE 90
NEGATIVE IMPACT
The iShares Semiconductor ETF (SOXX) has reached all-time highs with a 66% increase in 2023, but shows overbought signals which may lead to a short-term pullback.
The ETF's overbought status indicated by the RSI suggests a higher likelihood of a short-term price decline due to potential profit-taking.
CONFIDENCE 80
IMPORTANCE 90
RELEVANCE 100