Semiconductor shares have been tumbling amid a series of corporate warnings about slowing demand for chips that are used in an array of electronic devices such as mobile phones. The Philadelphia semiconductor index has slumped 11% over the past four weeks, underperforming the 7% decline in the Nasdaq 100, with laggards such as Nvidia Corp. hitting lows for 2022.
“There’s a palpable fear that the semiconductor cycle has begun to turn negative and demand is slowing,” said Jason Benowitz, a senior fund manager at Roosevelt Investment Group in New York. “If the downturn turns out to be deeper and longer and more broad, then we would expect technology to also underperform.”
Samsung Electronics added to concerns last week after a senior executive at the world’s largest chipmaker said the outlook for the second half of the year is gloomy and it isn’t seeing momentum for a recovery in 2023. That followed weak sales forecasts from companies such as Micron Technology Inc and Western Digital Corp.
Analysts have slashed profit estimates for semiconductor companies more than other parts of the tech sector. Earnings for chip-related companies in the S&P 500 are projected to be flat in 2023, down from expectations of 12% growth just three months ago, according to data compiled by Bloomberg Intelligence.