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Semiconductor stocks have soared over the last few quarters, driven higher by robust demand for chips amid a global supply shortage.
But the tide may be turning for semiconductor manufacturers, warned Truist analyst William Stein.
“On Wednesday afternoon we learned of a sudden negative shift in demand signals from a wide swath of computer, consumer, and communications OEMs [original equipment manufacturer] to at least some of their semi suppliers,” he wrote in a research note.
Stein noted the cuts related mostly to production in the second quarter, but demand throughout the second half of the year remained strong. While a single-quarter adjustment or a temporary headwind was possible, he was concerned that “a combination of just enough demand destruction and just enough additional supply is leading to a traditional cyclical downturn.”
As a result, Stein adjusted his price targets for several key semiconductor stocks, including
Advanced Micro Devices
(ticker:
AMD
),
Intel
(
INTC
), and
Nvidia
(
NVDA
). His new price target for AMD is $111, down from $144, while Intel’s target was cut to $49 from $53. He retained a Hold rating on both the stocks.
Nvidia remained a Buy for Stein, even though he lowered his price target to $298 from $347. While he is constructive on the stock and continues to rate it a Buy, he said near-term price effects could become more volatile.
His favored stocks were
NXP Semiconductors
(
NXPI
),
Analog Devices
(
ADI
), and
ON Semiconductor
(
ON
), which he said were less exposed to demand from the computer, communications, and consumer segment and were more reliant on industrial and auto demand.
Semiconductor stocks had been on a tear over the last seven quarters, but have since begun to normalize, with semi stocks off 20% from their peak last December, Stein said.
AMD stock was down 1.5% to $102.23 on Friday. The stock has lost almost 30% this year. Intel was down 1% to $47.10, while Nvidia was down 2.4% to $236.38.
Write to Sabrina Escobar at sabrina.escobar@barrons.com