What happened
Reports of the end of the semiconductor chip shortage may have been greatly exaggerated -- at least, according to one analyst.
Remember how earlier this week, Investors Business Daily cited a TrendForce report on the "relatively high levels of DRAM inventory" it was seeing at PC manufacturers, and the impending decline in chip prices in the fourth quarter of this year? Remember how investors panicked, thinking this might mean that the worldwide shortage of microchips might suddenly evaporate in less than six months' time? Remember how shares of Micron (MU -0.98%) and Nvidia (NVDA 1.74%) dropped suddenly on the news?
Well all that might have changed yesterday, when a completely different report came out on Bloomberg. And it might be the reason that Micron, Nvidia, and especially Advanced Micro Devices (AMD 0.05%) stock -- up 3.7% as of 12:45 p.m. EDT -- are gaining today.
Image source: Getty Images.
So what
Allaying the fears raised by IBD earlier this week, Bloomberg's latest news on the semiconductor industry is that the lag between a semiconductor company like AMD or Nvidia placing an order for a semiconductor and getting it delivered by a contract manufacturer is now longer than at any other time in history: 20.2 weeks.
And it's as long as 26.5 weeks for certain very in-demand chips.
Now what
As tech market-watcher TomsHardware.com comments, "this means the chip shortage is getting worse as a whole," not better. It suggests that, no, the semiconductor shortage will not in fact evaporate by Q4 2021. To the contrary, it might still stretch into 2023, as others have been predicting. And as TechRadar.com adds, it may mean that "the prices of various CPUs and GPUs may go even higher in the future" -- pulling semiconductor profit margins higher along with them.
Granted, I don't know if it means that AMD stock is a buy at more than 38 times earnings. That still seems like a stretch to me -- but the longer the shortage lasts, the more attractive AMD stock might become.
