What happened
Shares of semiconductor star Nvidia (NVDA 0.77%) jumped in Monday morning trading, up 3.6% as of 11 a.m. ET.
You can probably thank credit insurance company Euler Hermes for that.
Image source: Getty Images.
So what
Who is Euler Hermes, and what does it have to do with Nvidia, you ask? Well, according to its website, Euler Hermes is the "global trade credit insurance leader," providing insurance for business-to-business payments, and economic research for its clients. And as CNBC reports today, Euler Hermes has just put out a report predicting that semiconductor stocks such as Nvidia will be "strong going into 2022."
Global semiconductor sales will rise 9% in 2022, surpassing $600 billion in value for the first time ever, the company says. That's not as strong growth as the 26% increase in sales seen in 2021, granted. It's also not as strong as the 50% sales growth that Nvidia enjoyed last quarter. But even so, it's growth rather than contraction, and it's growth driven by "unusually strong demand" for consumer electronics -- growth that will bring with it pricing power for chipmakers "due to tight supply and demand dynamics."
Now what
It's not all good news for Nvidia and its fellow chipmakers, however. Euler Hermes sees risks to sales of computers and TVs as demand normalizes after strong sales in the pandemic years of 2020 and 2021. Supply chain disruptions are also likely to appear from time to time -- as we saw last week when China quarantined the entire city of Xian, disrupting supplies of semiconductor chips fabricated in that city. And the analyst warns of an "increasing frequency of unusually adverse climatic events" that could also disrupt chip supplies by damaging chip-making factories.
Of course, it's hard to predict such black swan events -- or perhaps we should be calling them "white swans" seeing as they're increasingly frequent. Perhaps the best hedge investors have against risks such as these is to not invest in overpriced stocks in the first place.
