By Wallace Witkowski
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That’s why Nvidia’s earnings, due on Aug. 24, are so important, especially the forecast for data-center sales and any color on supply-chain issues. While chip stocks have already taken a beating this year — the PHLX Semiconductor Index /zigman2/quotes/210598361/realtime SOX -1.56% has fallen 23% in 2022, well ahead of the 16% decline for the tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -1.71% — most are still more expensive than analysts’ average price targets.
|Chips (in order of market cap)||year-to-date %||+/- % average Street target vs current price||% gain in pandemic (since 3/11/2020)|
There is little hope that consumer trends will turn around soon, even with back-to-school shopping and holiday sales still to come. The beginning of the end for PC sales was evident when analysts estimated the worst quarterly unit sales drop in years, and demand from businesses is expected to decline even more.
“There’s an expectation that the bottom will fall out of the PC market this year as companies pull back on spending,” Lopez said. “There’s still some consumer demand, but we expect that to wane by Q1.”
The broader chip market has taken a big step forward in recent years, though, and is not expected to shrink substantially in the current pullback. In 2021, global semiconduc tor sales topped a record $556 billion, a 26% gain from 2020’s $440 billion and topping the 2018 sales record of $469 billion , and the number of total units shipped in a year topped 1 trillion for the first time.
Rasgon said that even when the sector hits a correction as it is now, it still grows.
“We can still do something in the ballpark of $600 billion this year,” Rasgon said. “We might still be over $500 billion next year even in a pretty solid downturn. The point I’m making is: Over the cycle, the industry grows. And any capacity they’re adding now, in five years, we’ll probably be glad they added it.”
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“In general we’re not in danger of chip demand falling off a cliff because everything is becoming connected and intelligent,” Lopez told MarketWatch.