US chip stocks tumble after strongest year since 2009

US chip stocks experienced further losses on Wednesday, following on from the strongest year on the markets since 2009.

The tumble of over 2% across the stocks of Advanced Micro Devices, Qualcomm, and Broadcom were the feature hits on the PHLX index, Wall Street’s main semiconductor benchmark, with its losses coming in at 2.1%.

As reported by Reuters — this means that the chip index has fallen from a record-high close on 27 December 2023 with a loss of almost 7% since then.

Republic World touched on a boom year for chip stocks, reflected in a surge of 65% over 2023. Still, the recent decline indicates a broader market awaiting the Federal Reserve’s December meeting minutes for a steer on the path of its interest rates.

The strong performance of PHLX last year was primarily galvanized by the optimism and strength of the AI boom, which saw its greatest returns in 15 years. The 65% increase for PHLX compared favorably to Nasdaq and the S&P 500 with their respective annual gains of 43% and 24%.

Bank of America analysis on stocks

However, the recent decline of almost 7% shows the volatility of the market due to factors such as premium valuations, market rotation, and associated trade tensions between the US and China.

Reuters noted Vivek Arya, a global research analyst at Bank of America who has highlighted exposure to cloud computing and automotive through stocks including Nvidia, Marvell Technology, NXP Semiconductors, and ON Semiconductor.

Arya also recommended stocks featuring KLA Corp and Arm Holdings, pointing to the evolution and complexity of chip design.

Nvidia, a global behemoth in chip making, surpassed the $1 trillion valuation mark last year. Still, even it has been impacted by the recent downturn, with a decline of almost 1% this week.

Chip stocks previously benefited from predictions that the downturn in global demand across 2023, which resulted in memory chip makers cutting production, had bottomed out.

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