The semiconductor market has reached a tipping point, which is why savvy investors should be looking for semiconductor stocks to sell at the moment. Semiconductor stocks have been on a stellar run over the past 2 years, thanks to the rapid rise of artificial intelligence (AI), 5G and data centers. However, the outlook of the industry does not look as promising going forward.
Despite reaching a record $595.7 billion in revenue in 2022, the semiconductor market experienced declines across all four quarters of 2023. Moreover, due to geopolitical tensions between the U.S. and China, some U.S. companies are at high risk of disruption due to their geographic concentration in China.
Furthermore, recent macroeconomic concerns, including inflation, high interest rates, and slowing global demand, have cast a shadow over the semiconductor sector. The Federal Reserve’s tightening policy and emerging economic headwinds could make the upcoming months challenging for chip stocks. Here are three semiconductor stocks to consider selling this month.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) has a diversified portfolio that spans both semiconductor and infrastructure software segments. However, the shifting market dynamics and geopolitical tensions pose headwinds for the company.
China accounts for a significant portion of Broadcom’s revenue. The country was responsible for around $11.53 billion of revenue in 2023, making it AVGO’s largest geographic market. With the U.S.-China trade tensions heating up, Broadcom is exposed to regulatory risks. Any restrictions on semiconductor sales could severely impact the company’s bottom line.
Moreover, Broadcom’s legacy software businesses, CA Technologies and Symantec, face headwinds. CA Technologies is entrenched in the declining mainframe market, while Symantec’s traditional antivirus solutions are being eclipsed by cloud-native competitors like CrowdStrike (NASDAQ:CRWD) and Palo Alto Networks (NASDAQ:PANW).
The company’s valuation multiples far exceed the semiconductor industry average. Much of Broadcom’s valuation is driven by expectations around its AI business. If AI-driven growth slows down, it can cause a significant downside in the stock price.
Intel (INTC)
Intel (NASDAQ:INTC) is known for its historical dominance in the CPU market. However, in recent years, the company has faced significant challenges, leading to a sharp decline in its stock price. Although the company posted revenues and earnings per share above analyst expectations, the company’s weak guidance for the upcoming quarter sent Intel shares tumbling. The company’s stock has fallen 35% since the start of 2024.
Intel Foundry has reported a deal pipeline exceeding $15 billion. However, profitability remains a distant goal for the company. Intel expects Intel Foundry to remain unprofitable until at least the midpoint of this decade. In addition, Intel faces competition from Taiwan Semiconductor Manufacturing (NYSE:TSM), which claims its N3P process will outperform Intel’s 18A node.
China represents Intel’s largest market, accounting for 27% of the company’s total revenues. However, recent regulatory changes have highlighted Intel’s heightened exposure to geopolitical risks. The Chinese government has urged state-backed organizations to reduce their reliance on foreign chips. This will have a direct impact on Intel’s market share.
Advanced Micro Devices (AMD)
In recent years, Advanced Micro Devices (NASDAQ:AMD) has emerged as a serious contender in the semiconductor industry. However, it faces stiff competition from Nvidia (NASDAQ:NVDA), which continues to dominate this space. Despite moderately positive earnings surprises, AMD’s stock has faced selling pressure of late. The stock has fallen 23% since the start of March this year.
Nvidia recently announced its next-generation Blackwell GPUs, coupled with advanced AI software offerings. This could pose a significant threat to AMD’s market share. Although AMD’s MI300 AI accelerator has made impressive gains, analysts remain cautious about its ability to compete effectively with Nvidia’s upcoming products.
While AMD has raised its FY2024 data center GPU revenue guidance from $3.5 billion to $4 billion, this pales in comparison to Nvidia’s $47.5 billion in data center revenues in FY2024.
With the stock currently trading at a relatively high price-to-earnings (P/E) valuation, investors should carefully assess the risk/reward of having money invested in AMD stock.
On the date of publication, Mohammed Saqib 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.
