Breakouts and sell-offs happen any time. In both cases, for the AI chip sector, they happen abruptly. On Tuesday, the Bureau of Labor Statistics reports soaring inflation, due mostly to higher energy prices. That triggered panic selling on Nasdaq (QQQ) and the S&P 500 (IVV).
By the end of the day, buyers emerged. However, three chip stocks failed to recoup their intraday losses.
Qualcomm (QCOM) closed down by around 11.5%, to $210.31. Its 52-week high from the day before was $247.90. Although author Tae Kim characterized Qualcomm as the problem child of today’s current chip rally, the drop is likely due to profit-taking.
QCOM stock led the decline in shares of AMD (AMD), Micron Technology (MU), and Intel (INTC). Sandis (SNDK) also fell below $1,400 before closing at $1,452.02.
Among the chip stocks mentioned, Intel’s rally has the most risk of a correction. Its forward P/E is nearly 120 times. That is many multiples higher than the incumbent AI chip firm, NVIDIA (NVDA).
Short interest on INTC stock is very low at 2.87%. That would limit any additional uptrend caused by a short squeeze. Instead, Intel needs to rely on continued buying momentum to hold the $121 level. If buying volume increases, the stock could retest the $132.75 all-time high.
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