U.S. Chip Stocks Begin 2024 in Decline
U.S. chip stocks have begun 2024 with a decline, following a remarkable performance in the previous year, which marked the best surge since 2009.
Market Performance and Recent Decline
Major chip companies such as Advanced Micro Devices Inc (AMD), Qualcomm Inc (QCOM), and Broadcom Inc (AVGO) saw a drop of more than 2%, causing a 2.1% decrease in the PHLX semiconductor index on Wednesday, according to a report by Reuters.
This comes after a nearly 7% decline in the chip index since setting a new high on Dec. 27. The Federal Reserve’s latest minutes from the December meeting showed that policymakers acknowledged that interest rates are likely at or near the cycle’s peak, indicating a potential shift in monetary policy as the economic landscape evolves.
Record Highs in 2023
In 2023, the PHLX semiconductor index rose by 65%, driven by enthusiasm for artificial intelligence and expectations that the Fed would reduce interest rates. This performance surpassed both the Nasdaq and S&P 500, which gained 43% and 24% respectively.
Impacts of External Factors
AI chip leader NVIDIA Corp (NVDA) tripled its stock market value to $1.2 trillion in 2023, making it the fifth most valuable company on Wall Street. However, it also faced a near 1% decline on Wednesday.
The Outlook for 2024
Despite the recent downturn, Bank of America maintains a bullish stance on the semiconductor industry for 2024, even after a 65% gain in 2023.
In 2023, chip companies like Nvidia and AMD profited from the crypto boom, with their GPUs becoming crucial for applications like data centers, AI, and crypto asset creation.
However, escalating US-China trade tensions have added to the sector’s volatility. The White House’s directive to a leading European chipmaker signals these growing tensions, causing a significant dip in semiconductor stocks at the start of 2024.
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