Semiconductor sales surpassed half a trillion dollars in a record 2021 and existing supply is practically sold out for 2022 as a global shortage continues, yet chip stocks have lost nearly a quarter of their value this year and one analyst calls the sector “almost uninvestable.”
Evercore ISI analyst C.J. Muse recently wrote that investors are waiting for chip executives to predict that supply is going to overtake demand and cut their forecasts. That makes the short-term outlook murky or worse, he wrote. “Our main concern is that the tight supply conditions and long lead times will disrupt the demand signals from the market, making it difficult for the semi supply chain to adjust production forecasts and capacity plans if and when demand changes,” Caso said in a recent note.
That dynamic hasn’t mattered much as consumer demand for the finished product has remained high, but that may not be the case anymore, especially for personal computers. A downturn in PC sales is now happening, after consumers and businesses stocked up on new computers during the first two years of the COVID-19 pandemic and may not need to buy more.The confusing semiconductor-sector setup will be tested this week, with a slew of after-the-closing-bell earnings reports scheduled.
Jefferies analyst Mark Lipacis went as far to say that Texas Instruments “is having a lot of trouble delivering enough parts as desperate customers pay $200 for a $1-2 part,” but that inventories are “not an issue yet” as they “are accumulating as OEMs are unable to complete manufacturing kits and build finished goods.”