Amid increasing evidence of sharply declining PC sales, decelerating data center revenue and anemic flash-memory growth, chip stocks are declining sharply again today. Today’s fall marks a continuation of the slump that the chip names have undergone in recent days.
Also contributing to the sector’s recent woes have been sinking crypto-mining expenditures and, of course, the general downturn of U.S. stocks since Fed Chairman Jerome Powell’s press conference on Wednesday.
New Evidence of Sector Weakness
After meeting with senior executives of chip makers Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD), Bernstein analyst Stacy Rasgon reports that global PC sales are declining more than the companies had previously expected.
Intel CFO David Zisner said that PC sales are on track to fall more than 10% year-over-year (YOY). In July, the chip maker had forecast that PC sales would drop 10% in 2022 versus 2021.
Dan McNamara, who leads AMD’s business-server unit, agreed that the PC market is poised to decline more than previously anticipated this year. The chip maker had previously expected PC sales to slump around 15% in 2022.
Moreover, Zisner reported that “the data-center market has weakened,” Barron’s noted. He blamed lower demand by Chinese companies and macro trends for the latter situation.
Earlier this week, I noted that Mizuho securities analyst Vijay Rakesh had downgraded Micron (NASDAQ:MU) and Western Digital (NASDAQ:WDC), citing weakening demand for the companies’ flash memory products, servers and hard disk drives.
Another Problem and One Bright Spot for Chip Stocks
In late August, Nvidia (NASDAQ:NVDA) noted that its gaming chip revenue had dropped a huge 44% in Q2 versus Q1. NVDA also cut its Q3 revenue guidance, blaming weaker-than-expected sales of its gaming chips. Multiple commentators have identified the crypto slump, which has resulted in much less crypto mining, as the main catalyst for the decline in the demand for Nvidia’s gaming chips. The latter chips are often used to facilitate crypto mining.
Also noteworthy is that Nvidia sells chips to data centers.
On a positive note, Qualcomm (NASDAQ:QCOM), another leading chip maker, yesterday reported that it expected the total addressable market for automotive chips to reach roughly $100 billion by 2030. Moreover, the chip maker stated that its “design-win pipeline” had jumped to $30 billion, versus its previous estimate of $19 billion.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.
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