If you are a public equities investor betting on the future of our digital economy, semiconductor stocks would have to be in your portfolio. While semiconductor stocks broadly performed well in 2023, especially those connected to the rise of artificial intelligence (AI), there are a number of semiconductor stocks to consider selling now. Not only is the semiconductor space crowded with fierce competition, but there are also many stocks trading at inflated multiples, making them ripe for a devaluation,
In this article, we will go over three semiconductor stocks unworthy to stay in investors’ portfolios.
Intel (INTC)
Although Intel‘s (NASDAQ:INTC) stock had an initial rough go of it in 2023, the company’s stock price ended the year nearly double its value at the start. The iconic chipmaker also remains dominant in the PC space. According to Mercury Research, as of the second half of 2023, the company commanded 68.4% of the x86 CPU market share. Moreover, INTC is pressing on in advancing its chip manufacturing process and expects to maintain its leadership by launching the 7nm Meteor Lake processors it announced in September.
What gets me concerned about Intel is its lack of competitiveness when it comes to chip manufacturing. The company is still well behind its chip manufacturing competitors Samsung and TSMC (NYSE:TSM). Not to mention, Intel’s valuation isn’t cheap either, trading at 31.9x forward earnings. This isn’t far off from Nvidia’s valuation multiple, but I think most would agree Nvidia’s prospects current overshadow those Intel at the moment.
Marvell Technology (MRVL)
Marvell Technology (NASDAQ:MRVL) is the second unworthy semiconductor stock to sell. This particular chipmaker specializes in designing components that help build data centers. This comprised 41% of Marvell’s business in 2023. The semiconductor company’s second significant source of revenue comes from selling routers, ethernet switches and servers for enterprise networks.
Unfortunately for Marvell and its shareholders, the company has been generating net losses, despite generating billions in revenue. Their recent 2023 annual report showed a net loss of $163.5 million when the company made $5.9 billion in revenue. These financial results have also made Marvell’s multiple unpalatable. The company, similar to Intel, trades around Nvidia’s multiple, particularly at 35.6x forward earnings.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) is a leading wireless technology and semiconductors business. Despite a positive earnings season for the chipmaker, I’m still holding a negative conviction for the stock. In particular, Qualcomm’s earnings figures beat Wall Street’s estimates, suggesting a possible recovery in the global handset market is in the works.
QCOM’s shares have risen more than 5% since the start of trading in 2024. Unfortunately, Qualcomm’s stock is still likely to face long-term jeopardy as China’s burgeoning semiconductor industry shifts the balance of power in the sector. SMIC, China’s major contract chipmaker, expects to produce five nanometer chips in 2024 for Huawei devices, despite U.S. sanctions. Rising competition in China does not bode well for Qualcomm’s chips in the long run, especially when nationalism could play a role in Chinese companies turning to locally produced semiconductor devices.
Unlike the other entries on this list, Qualcomm is trading rather cheaply at 15.7x forward earnings, but investors should not find this enticing, as the company’s long-term prospects are still cloudy.
On the date of publication, Tyrik Torres did not have (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.
