These semiconductor stocks are facing market demand problems and long-term growth issues.
If you are a public equities investor betting on the digital economy, semiconductor stocks would have to be in your portfolio. While many semiconductor stocks performed well last year, especially ones connected to the rise of artificial intelligence (AI), there were a number of semiconductor stocks to sell. The semiconductor sector is crowded, and nowadays, there are a number of geopolitical considerations to dwell on, as well as a global economic slowdown to think about.
In this article, we will go over three semiconductor stocks to sell.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) is a leading wireless technology and semiconductors business. Despite a positive earnings season for the chipmaker, I’m still holding a negative conviction for the stock. In particular, Qualcomm’s earnings figures beat Wall Street’s estimates, suggesting a possible recovery in the global handset market is in the works.
QCOM’s shares have risen just below 1% since the start of trading in 2024. Unfortunately, Qualcomm’s stock is likely to face long-term jeopardy as China’s burgeoning semiconductor industry shifts the balance of power in the sector. SMIC, China’s major contract chipmaker, expects to produce five nanometer chips in 2024 for Huawei devices, despite U.S. sanctions. Rising competition in China does not bode well for Qualcomm’s chips in the long run, especially when nationalism could play a role in Chinese companies turning to locally produced semiconductor devices.
Unless Qualcomm is able to make the right bets and investments on IoT and vehicle semiconductor devices, the company could face slowing growth in the coming years.
Texas Instruments (TXN)
Texas Instruments (NASDAQ:TXN) primarily operates two business segments: Analog and Embedded Processing. Relating to the former, analog semiconductor devices take real-world signals, such as sound or temperature, and convert them to an electronic signal other semiconductors can understand. For this reason, analog devices are paired with “embedded devices” and are used to manage, manipulate and divert power in electronics.
Texas Instruments, unfortunately, has suffered uneven sales growth since the early 2000s. In some years, like in 2021 or 2017, the semiconductor giant reported double-digit sales growth, but in other years, growth was either sluggish or contracted entirely.
The unevenness continued in its most recent Q4 earnings report. Sales missed targets while earnings came in ahead. Management did not provide a rosy picture on guidance either, most likely due to what it sees as slowing growth in its automotive and industrial segment. TXN shares are down more than 4% YTD and down nearly 7.62% over the past twelve months. Investors are probably better off selling this stock before things get worse.
Wolfspeed (WOLF)
Founded in 1987, Wolfspeed (NYSE:WOLF) designs and fabricates a variety of silicon wafers and power devices. In particular, the company leverages silicon carbide and gallium nitride materials to create semiconductor technologies for electric vehicles (EV), fast charging, and wireless applications. Wolfspeed uses silicon carbide in its power devices while employing gallium nitride in its radio frequency (RF) devices that help telecommunication infrastructure function.
Despite experiencing some years of record growth, Wolfspeed has struggled with profitability over the past decade, unlike many of its semiconductor peers. Like Texas Instruments, revenue growth has been uneven, with too many peaks and troughs.
In its Q4 2024 earnings print, the company widened its loss per share to $1.15/share from $0.73/share in the same period of the prior year. With higher profitability not in sight, equity investors should consider other opportunities, as there are several profitable, growing semiconductor businesses in the space.
On the date of publication, Tyrik Torres 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.