What happened
Many major semiconductor companies enjoyed strong share price gains on Tuesday, starting their climbs near 10 a.m. EDT, and peaking two hours later. The moves mirrored similar price trends across the stock market, amplified as each of these stocks bounced back from large price drops in Monday's market panic:
|
Company |
Specialty |
Max Gain on Tuesday |
Two-Day Return (Decline) |
|---|---|---|---|
|
Skyworks Solutions (SWKS +1.62%) |
Mobile communications chips |
18.9% |
(5%) |
|
Intel (INTC +6.41%) |
Central processing units (CPU) |
15.7% |
(9.1%) |
|
Micron Technology (MU +1.87%) |
DRAM and NAND memory chips |
13.5% |
(14.4%) |
|
NVIDIA (NVDA +4.84%) |
Graphics processors |
11.9% |
(10.8%) |
|
Advanced Micro Devices (AMD +3.36%) |
CPU and graphics processors |
10.8% |
(4.8%) |
Data source: Yahoo! Finance.
So what
As seen in the table above, all of these stocks crashed hard on Monday. The coronavirus pandemic weighed heavily on every sector that day, but a little bit heavier on many tech stocks such as these five names. Market-defining events are being moved around by virus-related effects, throwing shade on important target markets for these leading microchip makers.
For example, Apple (AAPL +2.80%) has canceled the scheduled unveiling of its next iPhone model. Cupertino may also need to move the production and store-shelf release of this important product (and others) due to coronavirus impacts on Apple's production pipeline. That's bad news for Apple suppliers like Micron and Skyworks, and Intel provides several important wireless radio chips for recent iPhones as well.
Moreover, the next generation of gaming consoles might miss the all-important holiday season if the coronavirus sticks around for too long. AMD makes the CPU and graphics chips for both the Xbox and PlayStation consoles today, and early leaks indicate that this market position will remain through the next generation as well. Any delay to these coveted stocking-stuffers would be terrible news for NVIDIA and Micron.
To be clear, none of the five semiconductor companies discussed here had any fresh news on Tuesday. These chip designers plunged on Monday when it looked like the whole consumer world was grinding to a halt. Their recovery on Tuesday indicates that the earlier sell-off may have been a bit too sharp. That's the way the cookie crumbles.
Image source: Getty Images.
Now what
These rebound moves look impressive under a microscope, but you don't have to zoom out very far to see that the semiconductor sector stands a long way from a full recovery. COVID-19 concerns will continue to drive share price moves in this corner of Wall Street until further notice, and I suspect that many of those moves will be made downward.
In other words, don't worry if you missed Monday's deep-discount buy-in window. You will probably see more drops along the way before the real recovery begins. Until then, many high-quality stocks with great long-term prospects are on fire sale. You should take advantage of these massive discounts.
