Dear clients,
Shares of Nvidia and other U.S. semiconductor companies are starting to slowly lose lustre after a stunning rally into 2023 as investors weigh high valuations, rising Treasury yields and signs of industry worries.
At the start of the year, shares of chip companies soared, with the Philadelphia SE Semiconductor (.SOX) index surging more than 50% through July. No stock has embodied the chip industry’s success more than Nvidia, whose shares tripled in 2023, when the company’s market value topped $1 trillion, driven by excitement around the central role of the company’s products in artificial intelligence applications.
However, the group’s performance has stalled. SOX is down more than 7% this month, compared with a 2.3% fall in the broad S&P 500 index, while Nvidia shares — the driver of this year’s broad market rally — are down more than 14% in September.
Investors said the group is also being impacted by industry concerns, including ongoing tensions between the U.S. and China over semiconductors. Washington is considering imposing restrictions on the sale of artificial intelligence chips, after export controls last year cut China off from some semiconductor chips made anywhere in the world on US equipment.
Another blow came from Taiwan’s TSMC, which asked its major suppliers to delay shipments of high-tech chip-making equipment as the world’s top contract chipmaker grows increasingly nervous about customer demand. Shares of several TSMC suppliers fell after the announcement.
Meanwhile, the excitement following last week’s initial public offering of Arm Holdings has died down, and shares of the chip developer have fallen for the fifth consecutive day.
Still, the sentiment among investors is still quite positive. Many chip stocks have risen significantly over the year, and this month may prove to be only a temporary setback.
