NEW YORK - Some of the shine is wearing off shares of Nvidia and other U.S. semiconductor companies after a stunning 2023 rally, as investors weigh steep valuations, rising Treasury yields and signs of industry unease.
“They have definitely lost some momentum," said King Lip, chief investment strategist at Baker Avenue Wealth Management. “Many of these chip names got that AI boost. Some of that fervor has kind of simmered down.” Valuations are coming under further pressure from the rise in Treasury yields. Higher yields on Treasuries - which are seen as virtually risk free - offer investment competition to equities, viewed as a riskier asset class.Yields jumped on Wednesday, with two-year yields hitting 17-year highs, after the Federal Reserve signaled a policy of interest rates staying higher for longer.
Industry-specific issues are weighing on the group as well, investors said, including ongoing tensions between the United States and China over semiconductors. Washington is considering restrictions on sales of AI microchips, following export controls last year to cut China off from certain semiconductor chips made anywhere in the world with U.S. equipment.