3 Chip Stocks to Sell Before the Big Semiconductor Downturn

Stocks to sell

As the market fades investors may be looking for which chip stocks to sell. The semiconductor sector is the canary in the coal mine for technology and much of the economy as a whole.

After memory chip supplier Micron Technology (NASDAQ:MU) sold off after its last quarterly report, PC suppliers followed lower. PC makers also posted weak quarterly results.

When looking for chip stocks to sell, investors should recognize that the sector is facing the worse semiconductor downturn of the decade. After corporations and consumers alike front-loaded computer purchases during the pandemic, demand slowed considerably.

They do not need to upgrade systems for a few more years. Technology investors hoped for more. They thought that corporations needed to invest more in centralized cloud computers. However, the economic slowdown looms.

With nearly everyone bracing for lower economic activity, they are slowing investments in capital equipment. These are the chip stocks to sell to avoid the worst of it.

NVDA Nvidia $134.40
AMD Advanced Micro Devices $77.31
MU Micron $52.64

Nvidia (NVDA)

An Nvidia (NVDA) semiconductor chip on a black background.

Source: Hairem / Shutterstock.com

Nvidia (NASDAQ:NVDA) plunged after posting weak quarterly results. At first, investors overlooked the company’s weak consumer graphics card sales. Then, the government ordered Nvidia to stop selling H100 integrated circuits to China, Hong Kong and Russia. Although it cannot sell A100 circuits, it may support existing customers for now.

NVDA stock fell because the restriction will cut around $400 million in potential sales to China. Investors expect Nvidia’s growth momentum will slow considerably in the coming quarters, making it one of the chip stocks to sell now. China represents a meaningful amount of business for the graphics card giant.

In the last quarter, Chief Financial Officer Colette Kress said the company expects gaming growth drivers in the future. Though gamers will snap up Nvidia’s current generation GPUs, the company faces profit margin pressures.

Advanced Micro Devices (AMD)

Sign of AMD office in Markham, Ontario, Canada. Advanced Micro Devices, Inc. is an American multinational semiconductor company.

Source: JHVEPhoto / Shutterstock.com

Advanced Micro Devices (NASDAQ:AMD) had a good run in 2021. The stock peaked at over $160 but is in a sustained downtrend in 2022.

Investors sold AMD stock on the news of CEO Lisa Su announcing Zen 4. The computer chip is available to consumers starting this month.

AMD did not raise the price of the Ryzen 5 7600X through to the top-end Ryzen 9 7950X. Fans will probably buy the new chips first. However, the mainstream consumer is likely cash-strapped. Inflation cut into their disposable income. Initial sales for the Zen 4 chips, which cost between $299 – $799, may disappoint investors.

PC upgraders will need a new motherboard platform and DDR5 memory instead of the less expensive DDR4 specification. Furthermore, Intel (NASDAQ:INTC) may announce Raptor Lake. Hardware sites already previewed the i9-13900K CPU. It is reportedly 5% to 30% faster than the current Alder Lake CPUs.

Micron Technology (MU)

Micron (MU) logo on a mobile phone that's on a table

Source: Piotr Swat / Shutterstock.com

Micron said that it faced some inventory adjustments in the last quarter. Customers are concerned about the weak macroeconomic environment.

They also face supply chain shortages. Still, Micron said the enterprise server OEM and end market demand is still healthy. In addition, the cloud computing market is healthy.

Digitization is a long-term trend that benefits Micron. Still, the firm reported weak demand in the China and the U.S. markets. Cloud sales may not offset those weaknesses sufficiently.

Micron needs to work through an inventory adjustment for NAND, used for high-speed storage, and DRAM, used in memory chips. The fir previously expected compounded annual growth rate for NAND is in the high 20% range.

It will come in below that. Similarly, it must adjust its inventory to account for weaker smartphone and PC markets.

On the date of publication, Chris Lau 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.

Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get actionable insight to achieve strong investment returns.

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