May 10, 2024

Earnings season for the largest semiconductor firms was able to hold a rebound after earnings beat expectations.

SOXX-–-Daily-ChartSOXX – Daily Chart

The price of SOXX saw a sharp breakdown, which took out an uptrend support line. The price is now testing $219-220, with the previous highs at $240.

Arm Holdings’ full-year revenue forecast on Wednesday missed investors’ expectations. The company had soared from its September IPO as a chip designer to the largest semiconductor firm. Shares of Arm fell 7% in after-hours trading in the U.S.

The semiconductor sector was booming on AI optimism but slipped last month on growing concerns about the long-term demand outlook for chips and weak demand from China. There were weaker earnings from Advanced Micro Devices AMD and Super Micro Computer, but the market is bidding the stocks with other tech sectors.

AMD delivered gloomy guidance for 2024 sales of its newly released AI chip, which pushed the stock down 9%. Although the company did raise its revenue target for the MI300 line to at least $4 billion from $3.5 billion. Wall Street was looking for a bigger boost, and around 12 analysts cut their price targets on AMD.

Super Micro Computer plunged 14% following its revenue miss due to concerns over the profitability of a new line of servers. However, some analysts raised the target price on the stock because AI demand is still in the early stages and will continue to grow.

The largest holdings in the SOXX index are Nvidia and Broadcom, which were up 6.27% and 3.7%, respectively, over the last week. Another top holding is Qualcomm, which is up almost 10% over that period. 

The outlook for the index is good if those large holdings can keep gaining, but this earnings season has raised some alarm bells about the pace of demand.

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