Stock Market Update: Chip Stocks Suffer as Taiwan Semiconductor Reports Earnings
Dow Jones futures edged higher overnight, along with S&P 500 futures and Nasdaq futures.
In the latest stock market news, chip stocks took a beating on Wednesday as investors awaited Taiwan Semiconductor’s earnings report. The stock market rally initially opened on a positive note, but quickly turned into losses, with the Nasdaq leading the retreat.
Chip Stocks Bear the Brunt
Wednesday saw disappointing results and guidance from semiconductor-equipment giant ASML, which impacted chip stocks. As a result, AI chipmakers Nvidia, Broadcom, and Arm Holdings suffered significant losses. Chip-gear makers ASML, Applied Materials, Lam Research, and KLA Corp. also faced a decline.
Meanwhile, AI server maker Super Micro Computer initially showed promise but reversed lower after triggering buy signals near the open.
Market Rally Performance
The stock market rally continues to face significant pressure, with Wednesday’s slim initial gains quickly turning into losses yet again. The Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite all declined, reaching their worst levels in two months. The small-cap Russell 2000 also fell, hitting a fresh two-month low.
Most recent breakouts or buy signals struggled or outright failed in the past few days, with the market remaining oversold. Factors contributing to the market’s current state include the CBOE Volatility Index trading around 2024 highs and the 10-year Treasury yield falling by 7 basis points.
Taiwan Semiconductor & the Chip Sector
Taiwan Semiconductor plays a crucial role in the chip sector, supplying chips to Nvidia, Apple, Broadcom, and other major players. The company reported Q1 sales above expectations, mainly driven by high-end AI chips. While Taiwan Semiconductor’s earnings are expected to be flat, its results and guidance will significantly impact AI chip leaders Nvidia, Broadcom, and Arm.
Chip Stocks Performance
Following Taiwan Semiconductor’s release of earnings, chip stocks witnessed mixed outcomes:
- Nvidia stock fell 3.9% to $840.35, dipping below the 10-week line for the first time since early November.
- Broadcom declined 3.3% to $1,284.61, breaking below the 50-day line.
- Arm stock dived 12% to $107.50, undercutting the lows of its consolidation and is now well below the 50-day line.
On the other hand, Super Micro’s AI servers, which use processors from Nvidia and other manufacturers, showed some promise, reaching a buy area after a spike but closing at $960.14, holding the 21-day and 50-day lines.
Taiwan Semiconductor’s Capital Spending Targets
Another important factor to consider is Taiwan Semiconductor’s capital spending targets, which will impact chip-equipment giants:
- ASML stock tumbled 7.1% to $907.61, dropping below its 50-day line and the lows of its flat base.
- Applied Materials, Lam Research, and KLA all slumped about 5%, piercing through their 50-day lines. Lam Research and KLA are set to report next week.
Tesla Stock Update
Tesla stock’s downward trend continued, with shares falling to 2024 lows and hovering just above a late-April 2023 bottom, at $155.45.
Investors and analysts are eagerly awaiting Tesla’s earnings report on April 23, as the conference call will offer vital insights into the company’s strategy. Notably, Tesla recently asked shareholders to approve reincorporating the company in Texas and a $55.8 billion pay package, which previously faced rejection from a Delaware court.
Market Analysis
The stock market’s poor performance in recent times is evident, as major indexes have broken below their 50-day moving averages. While there is a possibility of a brief rebound triggering a few buy signals, significant progress is still needed for the major indexes and leading stocks.
During this period of market weakness, wise investors have been scaling back their exposure by cutting losers and taking profits. Although upcoming earnings could potentially serve as a positive catalyst, caution is advised, and investors are encouraged to analyze stocks that demonstrate resilience, holding key levels and displaying relative strength.
Educating oneself on market trends and staying synced with the leading stocks and sectors by reading daily newsletters like IBD’s The Big Picture is highly recommended.
Disclaimer: This article reflects the market conditions at the time of writing, and the stocks discussed are not endorsements or recommendations.
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