2024-04-22 15:13:59 ET
Summary
- Semiconductor stocks have experienced a significant pullback, with some top names dropping 10% or more in a single day.
- The pullback can be attributed to stocks being overbought, higher interest rates, and concerns about an AI bubble.
- Two stocks that offer value after the plunge are Intel and Taiwan Semiconductor, with attractive valuations and potential upside catalysts.
Semiconductor stocks have had a big run over the last several months, and this sector was due for a pullback. As shown in the chart of the VanEck Vectors Semiconductor ETF ( SMH ) below, we just got a big pullback. This was even a plunge in some stocks, with some top names dropping 10% or more in a single day. This plunge appears to have been fueled by multiple factors. First of all, some of the stocks in this sector moved too far, too fast and were due for a correction from overbought levels. Secondly, interest rates have moved significantly higher in the past 3 weeks or so and the Federal Reserve seems to be resetting expectations to a higher for longer viewpoint. Higher interest rates impact the tech sector because investors are not willing to pay as much for growth when rates are elevated. I would say the third factor in the chip stock plunge seems to be concerns about an AI bubble....
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For further details see:
Sell-Off In Chip Stocks: A Big Buying Opportunity With Intel And TSMC