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Why Nvidia and Broadcom shares can’t save the chip sector by themselves
Published: Sept. 13, 2024 at 11:19 a.m. ET
By
Emily Bary

Despite renewed enthusiasm for Nvidia’s stock and select other hot AI plays, an analyst sees pessimism in many corners of the semiconductor sector

It’s been a strong week on Wall Street for the two biggest chip companies: Nvidia Corp. shares are up 15%, while Broadcom Inc. shares are up 20%.
It’s been a good week for the chip sector, as well. The PHLX Semiconductor Index SOX has gained 9% and is now back to outperforming the S&P 500 SPX on the year after losing its edge for a stretch earlier in September.

Read: Nvidia is expected to grow quickly through 2026. These companies may grow faster.
But the PHLX Semiconductor Index is still off 26% from its July highs, and Mizuho desk-based analyst Jordan Klein worries about the overall health of the sector — and whether Nvidia NVDA and Broadcom AVGO may be masking less upbeat sentiment toward other corners of the semiconductor universe.
Klein senses a negative tone toward many pockets of the sector, including memory, chip-equipment providers, analog, automotive and wireless. Plus, “no one will touch the [artificial-intelligence] server hardware suppliers” like Dell Technologies Inc. DELL and Super Micro Computer Inc. SMCI , he wrote, “given margin compression fears.”
See also: Nvidia CEO Jensen Huang addresses the big question on investors’ minds
With that backdrop, it’s a “real problem” that investors don’t see too many catalysts for the chip sector outside of hot names like Nvidia, Broadcom, Taiwan Semiconductor Manufacturing Co. 2330 TSM , Monolithic Power Systems Inc. MPWR and, “maybe,” Arm Holdings PLC ARM ,
he said.
Read: Why Arm’s stock just nabbed a new bullish call, even after doubling this year
Nvidia and Broadcom, for instance, “are important” but aren’t enough to lift the chip sector back into record territory, in his view.
“We need buyers and confidence off/in a broader set of semis,” Klein wrote. The risk with Nvidia and Broadcom shares, which are well loved by fund managers, retail investors and quantitative strategies alike, is that they “will get too crowded and concentrated and stall out.”

The momentum in Nvidia and Braodcom shares is cooling a bit on Friday, with Nvidia down fractionally and Broadcom up fractionally. Both stocks would clinch five-day winning streaks if they end in positive territory on the day.
Read more: Nvidia’s stock has been a huge S&P 500 driver. Here’s why its influence could wane.

See original version of this story

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About the Author

Emily Bary

Emily Bary is a MarketWatch news editor based in New York.

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