Semiconductors have long been crucial components in our favorite devices, powering everything from smartphones to cars. However, the once hot sector has started to cool down, and the outlook for semiconductor stocks in 2024 looks uncertain.
In 2023, semiconductor stocks experienced a lackluster performance. The initial boost came from the hype surrounding artificial intelligence (AI) and its potential impact on the industry. But as the year progressed, the AI buzz faded, leading to a decline in semiconductor stocks. The SPDR S&P 500 Semiconductor ETF (XSD) had a rough start to 2024, with a 2% drop in the first three trading days of the year.
One of the main challenges facing the semiconductor industry is lower customer demand for new chips. According to the KPMG and Global Semiconductor Alliance survey, while 83% of semiconductor executives project growing revenues, only 40% expect growth of 10% or more. The Semiconductor Industry Confidence Index for 2024 is at its lowest reading in five years, indicating mounting pressure in the sector.
To assess the health of semiconductor stocks, it is valuable to analyze the holdings in sector ETFs using a comprehensive system. The Green Zone Power Ratings system provides an overall picture of the sector’s health, as well as identifies strong leaders and weak laggards within the fund. The analysis of the XSD Semiconductor ETF revealed a bearish outlook, with an average overall rating of 38 for the 38 stocks held in the ETF. This suggests that the sector may underperform the broader market in the next 12 months.
While there are some strong performers within the sector, such as Universal Display Corp. and Broadcom Inc., investing in a basket of semiconductor stocks through an ETF may not be the most fruitful approach. Instead, investors should conduct thorough research and use tools like the Green Zone Power Ratings system to navigate the challenging semiconductor market.
In conclusion, semiconductor stocks face a challenging year ahead. The AI hype that boosted the sector in 2023 has subsided, and the industry is grappling with lower customer demand and increased pressure. Investors should approach the sector cautiously, conducting thorough analysis and utilizing reliable tools to make informed investment decisions.
The source of the article is from the blog kunsthuisoaleer.nl