The Philadelphia Semiconductor Index is now down 8.7% from its September 16 peak.
The slump comes as investors and traders sell on fears of supply-chain problems in the sector and especially in the memory chip market.
The drop has left the index testing its 200-day moving average, a support level that hasn’t been challenged since May of 2020.
Leading the retreat have been memory chip makers such as Micron Technology (MU) down 11.96% in the last three months as of the close on October 11, and semiconductor equipment makers. Applied Materials (AMAT), the big dog in that sector is down 6.83% in the last month, ASML Holding (ASML) is down 15.95% in the last month, Lam Research (LRCX) is lower by 7.38% in the last month, and Amkor Technology (AMKR) is off 9.61% in the last month.
Investors and traders will be hanging on guidance from chip equipment makers for the rest of 2021 and for 2022. How long do they expect the crunch to last? And how badly is it hitting orders for equipment?
AMSL Holding and LAM Research report earnings next week on October 20. Amkor Technology reports on October 25. Applied Materials doesn’t report until November 11.
I think the long-term story for chip makers is decidedly positive once we get past a supply chain crunch that is lasting much longer than expected.
You might consider using this temporary–but severe problem–as an opportunity to open long-term positions in stocks such as Applied Materials, ASML, and Lam Research.
I think the moment of maximum weakness might well come with earnings and guidance over the next few weeks.
Applied Materials, Lam Research, and ASML are all members of my 12-18 month Jubak Picks Portfolio. Those positions are up 19.81%, down 15.86% and up 15.88%, respectively, since I initiated them.
