Have semiconductor companies been cancelled? In the last month alone we’ve tried to cancel Shakespeare, Auckland’s shambolic train network and the thumbs up emoji. 👎 The way falling semiconductor shares have been heading, are they next on the list? Combined, chip makers have lost more than US$725 billion in market value since January. Shares in the iShares Semiconductor ETF (SOXX) have fallen 46% so far this year, nearly twice as much as the Vanguard 500 Index Fund ETF (VOO).
What’s driving the squeeze? What started out with fears of recession, discouraging consumers and businesses from spending cash on new computers, has morphed into a global chip battle between the US and China. New sanctions may even force US citizens to quit working on Chinese projects completely, or risk losing their citizenship, a move that some reckon could decapitate China's chips industry. Ouch. 🩹
The AMD (AMD) share price has certainly seen the guillotine this year. Shares are down 63% so far in 2022, and the company says that sharply slowing demand for PCs will mean less revenue than first thought in the third quarter. AMD says they now expect third quarter revenue to grow by 29% year-on-year, down from the 55% they’d previously anticipated.
Falling demand has been a real pain in the neck for Nvidia (NVDA) too. The company’s share price has also plummeted 63% so far in 2022 as demand from gamers has slowed. Nvidia’s also felt the pinch from US sanctions, announcing that they could lose up to US$400 million in revenue from restrictions on sending chips to China. But things aren’t all bad at Team Green. The company’s incredible new top-of-the-line RTX 4090 graphics card completely sold out on launch day. And despite being as big as an entire X-box, it hasn’t been cancelled yet. Thumbs up! 👍