© Reuters. Semiconductor chips are seen on a printed circuit board in this illustration picture taken February 17, 2023. REUTERS/Florence Lo/Illustration/File Photo
By Noel Randewich
(Reuters) – Brace for impact! U.S. chip stocks are on a rollercoaster ride, with Wall Street’s main semiconductor benchmark plunging from record highs after its surge during the strongest year since 2009. The sector is reliving the aftermath of the financial crisis, leading to dramatic drops of over 2% in Advanced Micro Devices (NASDAQ:), Qualcomm (NASDAQ:) and Broadcom (NASDAQ:) which dragged the PHLX semiconductor index down by 2.1%.
The chip index has plummeted nearly 7% since reaching a record high close on Dec. 27, contributing to the broader Wall Street decline. Investors are on edge as they await the Federal Reserve’s December meeting minutes for clues on its interest rate trajectory, feeding into the market’s unease.
Fueled by optimism about artificial intelligence and expectations of an interest rate cut, the PHLX surged 65% in 2023, its strongest performance since 2009. In comparison, the Nasdaq and boasted annual gains of 43% and 24% respectively, amplifying the chip index’s impressive run.
Nvidia (NASDAQ:), the top provider of AI-related chips, saw its stock market value more than triple in 2023 to $1.2 trillion, securing its position as Wall Street’s fifth most valuable company. However, it took a slight dip of almost 1% on Wednesday.
In an endorsement of cloud computing and automotive technology, BofA Global Research analyst Vivek Arya recommended exposure to stocks including Nvidia, Marvell (NASDAQ:) Technology, NXP Semiconductors (NASDAQ:) and ON Semiconductor (NASDAQ:). Arya also suggested keeping an eye on KLA Corp and Arm Holdings (NASDAQ:) to align with the increasing complexity of chip designs.
On a different note, Wells Fargo analyst Joe Quatrochi predicted a subdued recovery for chip equipment sellers in 2024, and highlighted KLA and Applied Materials (NASDAQ:) as top picks in that industry.
