3 Semiconductor Stocks to Sell in April Before They Crash & Burn
Semiconductors are being called the “oil of the 21st century.” Much like energy reserves, the U.S. government is securing reliable sources of semiconductors to fuel economic and technological growth. By 2030, the U.S. could produce 20% of the world’s most advanced semiconductors, according to American Commerce Secretary Gina Raimondo. The U.S. currently produces between 10% and 15% of its needed supply of microchips and semiconductors, relying heavily on offshore manufacturing in countries such as Taiwan and South Korea. However, the U.S. government plans to rectify the situation, having allocated $53 billion through the CHIPS Act to develop domestic semiconductor manufacturing.
In recent remarks, Raimondo and other politicians have likened efforts to develop chip manufacturing in the U.S. to the space race and called domestic chip production a matter of national security. Although the U.S. leads the world in designing microchips and developing artificial intelligence (AI) technologies, it doesn’t currently dominate in the manufacture of chips and semiconductors. That is starting to change. Since 2022, the U.S. private sector has announced $200 billion in semiconductor manufacturing investments. But while important, not every semiconductor stock is worthy of investor capital. Here are three semiconductor stocks to sell in April before they crash and burn.
Texas Instruments (TXN)
Shares of Texas Instruments (NASDAQ:TXN) have struggled for the last few years. TXN remained flat year-over-year and fell 5% over the last 12 months, completely missing the bull market since October 2022. The share price basically hasn’t moved since the onset of the Covid-19 pandemic in 2020. Soft sales and poor guidance have kept investors on the sideline and led analysts to downgrade Texas Instruments’ shares.
TXN stock fell 4% after the semiconductor company’s forward guidance at the end of January missed Wall Street targets. The company’s sales for the fourth quarter of 2023 came in at $4.08 billion, below the expected $4.12 billion. Earnings per share (EPS) of $1.49 was slightly ahead of Wall Street’s estimate of $1.47. For Q1 2024 revenue guidance, TXN forecasted $3.45 billion to $3.75 billion and up to $1.16 in EPS.
This guidance fell short of analysts’ forecast of $4.05 billion in sales and $1.40 in EPS, per data from FactSet. On a recent earnings call regarding Q4 2023, TXN management stated demand remains weak and they expect customers to reduce microchip inventories over the coming year. Time to sell before TXN stock really crashes and burns.
Intel (INTC)
Sad to say, but it might be time to throw in the towel on Intel (NASDAQ:INTC). Especially after the company announced a $7 billion loss in its manufacturing or foundry business. Intel said its foundry business had an operating loss of $7 billion in 2023 on sales of $18.90 billion. The latest numbers show that the loss grew from $5.2 billion in 2022 to $27.50 billion in sales. For the first time, Intel disclosed revenue for its foundry business independently and the news was not good.
The huge loss shows that Intel’s multi-year plan to pivot away from just designing microchips to also manufacturing them both for itself and other chipmakers is not going well. In reporting its latest loss, Intel said that it expects the foundry business’ losses to peak later this year and for the business unit to break even by the end of 2030. Intel’s efforts to manufacture semiconductors in the U.S. have helped it secure nearly $20 billion in federal funding. However, earlier this year, the company paused construction on a multibillion-dollar facility in Ohio, saying market conditions weren’t right.
The result of all this turmoil: INTC stock is down 17% this year. Through five years, the company’s share price has declined nearly 30%.
Qualcomm (QCOM)
Wireless semiconductor firm Qualcomm’s (NASDAQ:QCOM) stock hasn’t been terrible. Up 38% over the last 12 months, it has about matched the performance of the Nasdaq index composite. But it hasn’t performed exceptionally and has trailed many of its semiconductor peers. The company also isn’t currently seen as a big beneficiary of artificial intelligence (AI), at least not yet. With better options to choose from, it might be best to sidestep QCOM stock.
Qualcomm’s microchips and semiconductors are used to connect smartphones to cellular networks. While the company is trying to diversify beyond smartphones to new areas involving chips for personal computers, motor vehicles, and virtual reality headsets, the efforts haven’t borne much fruit so far. Also, the company forecast earlier this year that sales of its smartphone microchips are likely to be flat in 2024 as sales of the devices slow globally. That news left analysts wanting and led to a mixed outlook for QCOM stock.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
