Semiconductor market seen as ‘a bear’s den’ due to recession, Taiwan invasion feared

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Investors who see semiconductor companies as a source of opportunity may want to think again, according to a new assessment of the sector by Citi analyst Christopher Danely.

On Monday, Danely said the semiconductor stock market looked increasingly bleak. The ongoing war between Russia and Ukraine is front and center for many investors, and Danely said the situation was not helped at all due to growing sentiment about the possibility of an economic recession and fears that China will invade Taiwan.

“It’s a bear den out there,” said Danely, who added that the accumulation of semiconductor inventors creates higher risk and an environment for poor rewards “if you think a recession is coming”.

Danely said after meeting with “several investors,” sentiment toward companies that rely heavily on chip foundry Taiwan Semiconductor (NYSE:TSM)like Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ: NVDA) turns “bearish” on the chances that China is planning to invade Taiwan, which Beijing considers a “renegade province”. Danely added that much of the negative chip business surrounds big automotive companies such as NXP Semi. (NASDAQ: NXPI)Texas Instruments (NASDAQ:TXN)On semiconductor (NASDAQ:ON)Microchip technology (NASDAQ: MCHP) and analog devices (NASDAQ:ADI).

“[There is] a huge disparity between automotive semiconductor revenues and automotive production levels,” said Danely, who estimates that while automotive semiconductor units are expected to grow 41% this year from a year ago, auto production is expected to fall from its previous peak levels.

Danely also said there were “more yellow flags” of caution emerging from the PC market, such as February laptop shipments falling short of expectations amid rising product inventories at PC makers. pc. Danely said he still believes the first half of this year will be strong for PCs, but overall the likelihood of a slowdown in PC sales in the second half is “increasing and would be negative” due to the fact that PCs account for about 30% of total semiconductor demand.

Despite what appears to be a gloomy view of the chip market, Danely said he was “surprised” to hear that many investors are positive about chip giants Qualcomm. (NASDAQ: QCOM) and Intel (NASDAQ: INTC).

According to Danely, Qualcomm (QCOM) is attracting attention as it has gained market share in mobile phone chips, while Intel (INTC) has an attractive valuation and is seen as “a hedge against [a] Chinese takeover of Taiwan.” Danely also left its neutral rating on Intel (INTC) unchanged.

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