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.
But performance for the group has stalled. The SOX semiconductor index is off over 7% this month, versus a 2.3% drop for the broad S&P 500, while shares of Nvidia - a driver of the broader market’s rally this year - have declined more than 14% in September. As the stocks rose this year, so did valuations. At the end of July, the 21-stock S&P 500 semiconductors and semiconductors equipment industry group was trading at 28.5 times forward 12-month earnings estimates, compared to its 10-year average P/E of 16.5 times, according to LSEG Datastream.
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.
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