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Improved Semiconductor Market Augurs Well for Intel and AMD

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Semiconductor revenues could decline in 2015

Earlier in this series, we discussed how the PC market continues to decline. The semiconductor market, which depends heavily on the well-being of the PC industry, has also shown signs of decline. According to a report from Gartner, the worldwide semiconductor sales could decline by a year-over-year (or YoY) rate of 0.8% in 2015. This will be the first decline for this market since 2012.

The main reasons cited by Gartner for this decline were the strong US dollar and the slowing Chinese (FXI) economy. However, the research firm is optimistic about the prospects for the semiconductor market in 2016. Gartner predicts 1.9% growth in this market in 2016 for the market to reach $344.1 billion.

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Semiconductor stocks start to rise rapidly

An improved outlook for the semiconductor market could be the reason why Intel (INTC), AMD (AMD), and Micron (MU) have gained despite weak earnings results. Intel’s revenues declined by a YoY rate of 8%, AMD’s revenues declined by 26%, and Micron’s revenues declined by 15% in the quarter ending on September 30, 2015.

Still, Intel’s stock rose by 10% over the last month, as the above chart shows. During this same period, AMD’s stock rose by 6%, and Micron’s stock rose by 13%. Nvidia’s (NVDA) stock has gained by 20% in the last one month, even though it is yet to announce its earnings.

Investors have started to believe that semiconductor stocks have bottomed out, and the industry’s improved outlook as cited provided by Gartner supports their perspective.

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