These two big chip companies have had a great week on Wall Street. Shares of Nvidia Corp. are up 15% and shares of Broadcom Inc. are up 20%.
Also, the chip business has had a good week. Since the beginning of September, when it lost its edge, the PHLX Semiconductor Index SOX 1.68% has gained 9% and is now back to beating the S&P 500 SPX 0.54% on the year.
But the PHLX Semiconductor Index is still down 26% from its July highs, and Jordan Klein, a desk-based analyst at Mizuho, is worried about the health of the sector as a whole and whether the positive outlook for Nvidia NVDA -0.03% and Broadcom AVGO 1.90% may be hiding less positive views on other parts of the semiconductor world.
Klein feels that many parts of the industry are being looked down upon. These parts include memory, chip-equipment providers, analogue, cars, wireless, and chip-equipment providers. Also, he wrote, “niche-cutting fears mean that no one will touch the [artificial intelligence] server hardware suppliers” such as Dell Technologies Inc. DELL 1.92% and Super Micro Computer Inc. SMCI 3.40%.
He said that investors don’t see many opportunities in the chip sector besides popular names like Nvidia, Broadcom, Taiwan Semiconductor Manufacturing Co. 2330 0.74% TSM 0.62%, Monolithic Power Systems Inc. MPWR 2.03%, and “maybe” Arm Holdings PLC ARM 5.88%.
He thinks that companies like Nvidia and Broadcom “are important,” but they aren’t enough to get the chip industry back to record highs.
Klein wrote, “We need buyers and faith in a wider range of semis.” People who run fund managers, individual investors, and quantitative methods all love Nvidia and Broadcom stocks. However, there is a chance that they “will get too crowded and concentrated and stall out.”
On Friday, Nvidia and Broadcom stock prices aren’t moving as fast as they were earlier. Nvidia is down a small amount, and Broadcom is up a small amount. Both stocks would have won five days in a row if they ended the day in the black.
