Rally in AI Chip Stocks Faces New Headwinds – Why are tech stocks Nvidia, Taiwan Semiconductor, Broadcom, and Marvell falling?
Semiconductor and chip stocks including NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Co. (NYSE:TSM), Broadcom Inc. (NASDAQ:AVGO), Marvell Technology Inc. (NASDAQ:MRVL) and Lam Research Corp. (NASDAQ:LRCX) fell on Wednesday ahead of NVIDIA's second-quarter earnings report, reflecting the interconnectedness of the semiconductor ecosystem.
The selloff also comes as Nvidia's main partner, Super Micro Computer, Inc. (NASDAQ:SMCI), is facing accusations from Hindenburg of accounting fraud, related party transactions, etc. and delayed filing of its annual report. Super Micro's shares are down nearly 27%.
NVIDIA's second-quarter fiscal 2025 revenue guidance of $27.44 billion to $28.56 billion represents a significant increase from second-quarter fiscal 2024 revenue of $13.51 billion, proving that artificial intelligence continues to be a tailwind for the company's stock, which is up more than 172% over the past 12 months.
JP Morgan's Harlan Sah predicts that Broadcom's acquisition of ChatGPT's parent company OpenAI and major AI ASIC customers could give it access to the AI semiconductor business opportunity worth more than $150 billion over the next five years.
The analyst backed up his prediction with Broadcom's plans to expand production of Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) and Google's next-generation 3nm TPU AI processors, and the fact that Meta Platforms Inc. (NASDAQ:META) is a key partner for Broadcom. Broadcom shares are up 87% over the past 12 months.
Suhr previously noted that Broadcom has 80% market share in the $5 billion to $7 billion data center/AI Ethernet switching and routing chipset market, putting the company ahead of Nvidia and Marvell Technology.
Taiwan Semiconductor is a key supplier to NVIDIA, leading the global foundry market with a 62% share as of the second quarter of 2024. The company forecast third-quarter revenue of $22.4 billion (up from $17.3 billion in the same period last year to $23.3 billion), buoyed by robust demand for hyper-performance computing and AI, especially in smartphones.
The contract chipmaker is considering raising prices for its 3-nanometer and 5-nanometer process products to maintain its profit margin targets.Taiwan Semiconductor shares have risen more than 80% in the past 12 months.
AI server company Supermicro is also benefiting from the AI boom. The company expects first-quarter revenue of $6 billion to $7 billion, well above the $2.12 billion in revenue it announced a year ago. The company's shares have risen more than 61% in the past 12 months, buoyed by demand for AI servers from major tech companies.
Marvell Technology expects second-quarter revenue of $1.19 billion, up from $1.34 billion a year ago, on ramping up production of custom AI silicon for data centers, enterprise networking and telecom infrastructure. The company's shares have risen more than 24% over the past 12 months.
The story continues
Lam Research expects first-quarter sales of $3.75 billion, up $4.35 billion from $3.48 billion a year ago. The company is ramping up spending on wafer-fabrication equipment thanks to demand for AI-enabled chips. The company's shares have risen more than 20% in the past 12 months.
Price Action: TSM shares were down 2.07% to $167.01 as of last check on Wednesday, AVGO was down 2.66% to $157.06, MRVL was down 2.55% to $67.94 and LRCX was down 2.49% to $801.29.
Image courtesy of Nvidia Blog
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The article “AI Chip Stock Rally Faces New Headwinds – Why Tech Stocks Nvidia, Taiwan Semiconductor, Broadcom, Marvell Are Falling?” originally appeared on Benzinga.com.
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