The benchmark PHLX Index (SOX) started at 3,258 this week, down 5.61% over the prior week. The SOX is also down 17.42% on a year-to-date basis.
Here are the semiconductor stock stories to watch for the week, with outlooks from TheStreet’s investment experts.
Panasonic $1,113. 5-day performance (-)5.44%.
Panasonic (PCRFY) meets the definition of a large-cap stock at $26 billion, but its stock has traded lower in 2022, down $16.56 on a year-to-date basis.
The company is taking big steps to shake off the rust, with one of the largest moves focusing on providing vehicle electronics and batteries for companies.
Panasonic has been doing so since 2014, when it inked a pact to provide Tesla (TSLA) with automotive batteries. Now the technology and chips maker has big plans in the U.S. that could eventually make Tesla cars more affordable.
Tesla is aiming to aggressively ramp production from the 900,000+ vehicles it delivered last year, TheStreet’s Tony Owusu reported. “This means the company will have to rely on all the automotive batteries it can get its hands on.”
That’s where Panasonic comes into the picture. The company recently announced that it’s looking to purchase enough land in the United States for a giant factory to make Tesla's new EV battery, public broadcaster NHK reported on Friday, March 4.
“The company is looking to spend several billion dollars to build the expansive facility in either Oklahoma or Kansas, two states that are close to Texas where Tesla is preparing its own new EV plant,” Owusu said. “Panasonic, which would not comment to Reuters on the report, has said in the past that it plans to begin mass-producing the new type of lithium battery for Tesla by the end of March 2024.
The importance of this battery can't be overstated as Tesla sees it as a game changer for the company.
“One of the things that troubles me the most is that we don’t yet have a truly affordable car, and that is something that we will make in the future. But in order to do that, we’ve got to get the cost of batteries down," Musk told investors at Tesla's 2020 Battery Day.
LFP battery chemistry is cheaper to produce than the current lithium-ion batteries and doesn’t use nickel and cobalt. But the batteries have less energy density, which results in lower ranges for EVs.
“Tesla is already producing vehicles with LFP batteries at its plant in Shanghai,” Owusu said. “Those vehicles are sold in Asia and Europe.”
Broadcom $595.31.5-day performance 1.46%.
Broadcom (AVGO) is on an upswing, with Truist raising its share price outlook on the semiconductor company from $656 to $689 last week.
The company’s stock is also trading higher after better-than-expected earnings on Thursday, March 3.
“The company beat on earnings and revenue expectations and provided a strong outlook,” TheStreet’s Bret Kenwell observerd. “Don’t forget it yields almost 3% with its dividend, too.”
It hasn’t been an easy run for Broadcom. At one point in January, shares were down 25% from the high in less than a month.
“Amid one portion of that decline, shares fell in 10 out of 12 sessions, as everything related to tech and semiconductors were under pressure,” Kenwell stated. “That’s true for Advanced Micro Devices AMD and Nvidia NVDA as well.”
After such a huge decline, the trouble is figuring out which type of correction a stock is in. Is Broadcom currently in the midst of a rallying leg in an even larger downturn, or is it now working on a potential “ABC” upside rally?
For now, Kenwell’s siding with the latter.
“If this was a bearish setup, my view is that the February low would have been much closer to the January low,” Kenwell noted. “In fact, in an ideal bearish scenario it would have broken below the Jan. 24 low. Instead it put in a higher low.”
With last Friday’s rally, Broadcom stock is also breaking out over the 61.8% retracement of the current dip. Plus Broadcom has good fundamentals, Kenwell said.
“That all said, I’m not a raging bull by any means,” he noted. “That’s because the Volatility Index is still above 30 and as Broadcom shares race into the 50-day moving average.”
So far this year, the 50-day has been resistance for most stocks and that has been the case for Broadcom too. “
If it can push through this measure — and that’s a big "if" — then the $615 area is in play, which is the February high,” Kenwell said. “Above the February high and we could have a monthly-up rotation on our hands. That could open the door up to the $650 to $655 zone, where the 161.8% extension of the current range comes into play.”
On the downside, Kenwell would lose all faith if Broadcom lost the $575 level.
“That would put it below the 10-day and 21-day moving averages, as well as the 61.8% retracement, the post-earnings low and the daily VWAP measure,” he said.
Nvidia $228.30. 5-day performance (-)5.05%.
As if global chip shortages weren’t enough, Nvidia (NVDA) announced it was recently hit with a cyberbreach that “totally compromised” its internal systems, as hackers began leaking employee passwords online.
“The Lapsus$ ransomware group claimed responsibility for the breach last week, and has since been increasing its demands via messenger portal Telegram,” reported Riley Gutiérrez McDermid, at TheStreet.
The breach took particular aim at Nvidia's Lite Hash Rate, which crypto evangelists abhor for curbing the amount of cryptocurrency Ethereum that can be mined on the company's RTX 30 series graphics cards.
“We want Nvidia to push an update for all 30 series firmware that remove every LHR limitation otherwise we will leak [the hardware] folder,” the Lapsus$ group said on Telegram in broken English, TechCrunch reports. “If they remove the LHR we will forget about [the] folder … We both know LHR impact mining and gaming.”
The source code is Nvidia's “crown-jewel”, Gutiérrez McDermid stated. “The cyberattack reportedly accessed info from 71,000 Nvidia employees, according to Have I Been Pwned, a website that tracks data breaches.”
The semiconductor sector has been on high alert during Russia's conflict with Ukraine, with many chipmakers steeling themselves for malware and various forms of cyber warfare after American manufacturers and their products joined the list of sanctions imposed on Russia.
But Nvidia officials don’t believe there’s evidence of Ukraine-related international intrigue.
"We are aware that the threat actor took employee credentials and some NVIDIA proprietary information from our systems and has begun leaking it online," the company said in a statement. "Our team is working to analyze that information. We do not anticipate any disruption to our business or our ability to serve our customers as a result of the incident."
Nvidia recently reported a record $7.64 billion in revenues, up 53% on a year-to-year basis. Revenues were also up 8% on a quarterly basis.
Market analysts have largely waved off the Nvidia cyber-attack as a short-term issue with most analysts sticking with NVDA as a solid “A-rated” stock.
