By Wallace Witkowski
“While multiples have compressed to start the year, we see no changes to the sector’s long-term prospects with secular trends outweighing cyclical concerns,” Ramsay said. “While it has been a tumultuous start to the year, perspective is warranted as most names in our coverage universe are coming off all-time highs with this selloff providing investors opportunity for profit-taking or the ability to re-enter/build positions at more favorable valuations.”
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Bank of America analyst Vivek Arya said he remained “bullish on semis – the new ‘oil’ of the rapidly digitizing global economy.”
Following 2021’s growth, Arya expects 13% growth in chip sales of $619 billion total in 2022, with memory sales rising 21%, and 10% growth in non-memory chips. Interest rate increases from the Fed, however, “are the biggest risk to semi industry valuation for CY22 in our view, leading to a potentially weak Q1,” Arya said.
Underscoring the high bar chip companies are facing, the PHLX Semiconductor Index /zigman2/quotes/210598361/realtime SOX -2.63% that tracks major chip stocks soared 60% in 2019, 51% in 2020, and 41% in 2021. By comparison, the S&P 500 index /zigman2/quotes/210599714/realtime SPX -2.01% gained 29% in 2019, 16% in 2020, and 27% in 2021. Year-to-date, the SOX index is down more than 11%, while the S&P 500 is off 7%.
On top of that, just before earnings season kicked off for U.S. chip makers, the sector moved dangerously close to slipping into bear market territory on Monday and Tuesday.
The outlooks are already rolling in with Texas Instruments Inc. /zigman2/quotes/202237907/composite TXN -0.94% reporting a strong quarter and outlook late Tuesday , and Intel is scheduled to report late Wednesday. Intel’s earnings come just a few weeks after announcing it poached Micron Technology Inc.’s /zigman2/quotes/205710729/composite MU -1.57% CFO David Zinsner and named Michelle Holthaus to head its largest business unit, client computing, better known as the PC business.
Suppliers of chip manufacturing equipment are also on deck: Lam Research Corp. /zigman2/quotes/208077897/composite LRCX -2.56% is scheduled for Wednesday and KLA Corp. /zigman2/quotes/209248041/composite KLAC -2.51% on Thursday. Earnings and outlooks from those companies are key in gauging the speed of the industry’s increase of manufacturing capacity.
| Company name and ticker symbol | Report date (*estimated) | FactSet EPS est. (as of Jan. 21) | FactSet revenue est. (as of Jan. 21) |
| Texas Instruments TXN | Jan. 25 | $1.95 | $4.43 billion |
| Intel INTC | Jan. 26 | 90 cents | $18.33 billion |
| Lam Research LRCX | Jan. 26 | $8.51 | $4.41 billion |
| KLA Corp. KLAC | Jan. 27 | $5.44 | $2.33 billion |
| AMD AMD | Feb. 1 | 76 cents | $4.52 billion |
| Qualcomm QCOM | Feb. 2 | $3.01 | $10.44 billion |
| GlobalFoundries GFS | Feb. 8 | 11 cents | $1.81 billion |
| Nvidia NVDA | Feb. 16 | $1.22 | $7.41 billion |
| Marvell MRVL | Mar. 10* | 48 cents | $1.32 billion |
| Broadcom AVGO | Mar. 17* | $8.13 | $7.61 billion |
| Micron MU | Mar. 30* | $1.96 | $7.52 billion |
Advanced Micro Devices Inc. /zigman2/quotes/208144392/composite AMD -6.24% , with a new line of gaming cards , is scheduled to report earnings of Feb. 1. Recently, Piper Sandler analyst Harsh Kumar downgraded AMD on concerns that a slowdown in the PC market, and NXP Semiconductors NV /zigman2/quotes/202999625/composite NXPI -2.92% on a slowdown in auto chip sales when supply normalizes.
Qualcomm Inc. /zigman2/quotes/206679220/composite QCOM +3.48% is scheduled to report Feb. 2, and eyes will be on the company’s 5G sales forecast as AT&T Inc. /zigman2/quotes/203165245/composite T -0.82% and Verizon Communications Inc. /zigman2/quotes/204980236/composite VZ -0.98% postpone rollouts of 5G service near airports as airlines alter flight schedules in a continuing debate on how the technology’s signal affects aircraft.
After that, GlobalFoundries Inc. /zigman2/quotes/230483311/composite GFS -2.31% reports on Feb. 8; Nvidia Corp. /zigman2/quotes/200467500/composite NVDA -5.26% , which recently showcased its new gaming cards , is scheduled to report on Feb. 16, the day right before Intel’s investor day . Recently, Nvidia experienced a big setback when the U.S. sued to block the company’s acquisition of chip designer Arm Ltd., causing the chip maker to reportedly give up on the deal.
After that, Marvell Technology Inc. /zigman2/quotes/200053236/composite MRVL -4.89% is forecast to report around March 10, while Broadcom Inc. /zigman2/quotes/200646538/composite AVGO -1.44% is estimated to report around March 17, and Micron, which reported last in late December, is expected to report its earnings around March 30.
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