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Drops of over 2% in Advanced Micro Devices, Qualcomm and
Broadcom weighed most on the PHLX semiconductor index, which was
down 2.1%.
The chip index has now declined almost 7% since reaching a
record high close on Dec. 27.
This week's drop in semiconductor stocks has tracked a broad
Wall Street decline as investors await the Federal Reserve's
December meeting minutes due later on Wednesday for clues on its
interest rate path.
Fueled by optimism about artificial intelligence and more
recently by expectations the Fed will cut interest rates this
year, the PHLX surged 65% in 2023, its strongest performance
since 2009. That compares to annual gains of 43% and 24%,
respectively, for the Nasdaq and S&P 500.
Chip stocks have also benefited from bets that a downturn in
global demand last year that saw memory chip makers cut
production has largely bottomed out.
Nvidia, viewed as the top provider of AI-related chips, saw its
stock market value more than triple in 2023 to $1.2 trillion,
making it Wall Street's fifth most valuable company. It dipped
almost 1% on Wednesday.
In a client note, BofA Global Research analyst Vivek Arya
recommended exposure to cloud computing and cars through stocks
including Nvidia, Marvell Technology, NXP Semiconductors and ON
Semiconductor. Arya also recommended stocks including KLA Corp
and Arm Holdings for exposure to the increasing complexity of
chip designs.
In another note, Wells Fargo analyst Joe Quatrochi said he
expects a muted recovery for chip equipment sellers in 2024, and
pointed to KLA and Applied Materials as top picks in that
industry.
(Reporting by Noel Randewich; Editing by David Gregorio)
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