Daily Stock Market Reports

Why Are Qualcomm, Micron, and AMD Stocks Falling?


What happened

Semiconductor stocks tumbled in afternoon trading Monday. By close of trading, Qualcomm (NASDAQ:QCOM) stock lost 7.5% and Micron Technology (NASDAQ:MU) was down 7.6%. Advanced Micro Devices (NASDAQ:AMD) suffered a smaller, 5% loss.

Why these stocks are falling is the question.

Stock arrows trending down against a cityscape and global map background.

Image source: Getty Images.

So what

There wasn’t any particular “bad news” to explain the declines, after all — no negative press releases from the companies themselves, no analyst downgrades, nor even so much as a lowered price target. The contrary would be more accurate.  

While the geopolitical news these past two months has been anything but reassuring, according to an article appearing on Investors.com this morning, stock market analysts are nonetheless “pound[ing] the table,” and encouraging investors to buy semiconductor stocks. Needham recommended Silicon Labs today, and Susquehanna Financial Group named Marvell Technology and Power Integrations as two of its favorite stocks (on a list that also includes AMD).    

Separately, Goldman Sachs resumed coverage of yet another semiconductor stock — Nvidia (NASDAQ:NVDA). Goldman may not have quite come out and recommended Nvidia stock, but the analyst did predict a “proliferation” of artificial intelligence and machine learning technologies that could “drive earnings growth” for leaders in this industry. And although Goldman assigned Nvidia only a “neutral” rating today, it also gave Nvidia a $245 price target, indicating the stock has as much as 15% upside from today’s prices.

Now what

15% upside in a semiconductor stock that costs more than 60 times earnings already?

If that’s the case, then you have to figure it makes AMD an even better bet at 47 times earnings (and a faster projected earnings growth rate than Nvidia has — 25% versus just 21%, according to data from S&P Global Market Intelligence). Qualcomm at less than 20 times earnings, and Micron at less than 14 times earnings, also look quite tempting at current levels.

Perhaps instead of selling all these semiconductor stocks, investors should actually be buying — or at least buying the cheap ones.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.





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