Selling pressure accelerated in the last six months for semiconductor stocks. The markets are bearish on them because they anticipate a slowdown ahead. At best, global markets will face a recession.
Interest rate spreads for short-term government bonds and long-term debt inverted. This is one indicator of a recession. The hyperinflation rates will hurt demand, slowing GDP. Chip companies will suffer the most in the technology sector.
Micron (MU) briefly bucked the trend of fear of weak results when it posted quarterly figures. Micron earned $2 a share on $7.79 billion in revenue. Gross margins were at a healthy 47.2%. At first, markets lifted MU stock. Within days, MU stock gave up all post-earnings gains and traded lower by the end of the weak.
MU stock has a good chance of rallying on fundamentals.
Analysts reacted hastily to the MU stock selling by removing Qualcomm (QCOM) from the focus list. Apple's (AAPL) sales risk weakening amid higher inflation. This infers that smartphone demand will fall. This would pressure Qualcomm’s 5G communications chip and processor sales.
At current price-to-earnings multiples in the teens, QCOM stock is attractive. Investors may also add Qorvo (QRVO), Skyworks (SWKS), and Applied Materials (AMAT) to the watch list.
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