Chip stocks made a breathtaking comeback in the first quarter, but don't be surprised if the rally gives up some of its gains, investors warn. The semiconductor sector on Friday wrapped up its best quarter since 2020 as investors rotated back into the downtrodden industry, with names like Nvidia notching its best quarterly stretch since 2001. So far this year, the iShares Semiconductor ETF has gained about 22%.
mountain Nvidia shares so far this year Despite their cyclical nature and close correlation to demand and the state of the economy, these names bounced to start the year as one of the biggest global economies reopened, bond yields declined , and investors bet that the sector's incredible pain was nearing a bottom. The rise in shares also coincided with the hope that an end to the Federal Reserve's hiking cycle may be just around the corner.
mountain The iShares semiconductor ETF so far in 2023 Of the five previous instances in which the sector hit overbought territory, semis underperformed by 12% on average within the proceeding nine months, Garthwaite said. He added that the group trades expensive on a price-to-earnings, price-to-book and price-to-sales basis. Still, there is another way to look at the move. The semi bounce may signal fundamentals for the sector are bottoming out.
mountain Intel shares up about 24% in 2023 CFRA's Zino said investors need to beef up their AI investments to get ahead of the trend in its early innings. He likes Marvell and Broadcom because no matter who wins the AI war, these two companies will benefit from the need for chips powering connectivity as servers require more GPUs.