Drops of over 2% in Advanced Micro Devices (AMD.O), Qualcomm
(QCOM.O) and Broadcom (AVGO.O) weighed most on the PHLX semiconductor index
(.SOX), which was down 2.1%.
The chip index has now declined almost 7% since reaching a
record high close on Dec. 27.
This week's drop in semiconductor stocks has tracked a broad
Wall Street decline as investors await the Federal Reserve's December meeting
minutes due later on Wednesday for clues on its interest rate path.
Fueled by optimism about artificial intelligence and more
recently by expectations the Fed will cut interest rates this year, the PHLX
surged 65% in 2023, its strongest performance since 2009. That compares to
annual gains of 43% and 24%, respectively, for the Nasdaq (.IXIC) and S&P
500 (.SPX).
Chip stocks have also benefited from bets that a downturn in
global demand last year that saw memory chip makers cut production has largely
bottomed out.
Nvidia (NVDA.O), viewed as the top provider of AI-related
chips, saw its stock market value more than triple in 2023 to $1.2 trillion,
making it Wall Street's fifth most valuable company. It dipped almost 1% on
Wednesday.
In a client note, BofA Global Research analyst Vivek Arya
recommended exposure to cloud computing and cars through stocks including
Nvidia, Marvell Technology (MRVL.O), NXP Semiconductors (NXPI.O) and ON
Semiconductor(ON.O). Arya also recommended stocks including KLA Corp (KLAC.O)
and Arm Holdings (O9Ty.F), for exposure to the increasing complexity of chip
designs.
In another note, Wells Fargo analyst Joe Quatrochi said he
expects a muted recovery for chip equipment sellers in 2024, and pointed to KLA
and Applied Materials (AMAT.O) as top picks in that industry. -Reuters