What triggered the slowdown in 2018?
For the semiconductor industry, 2018 started off with the disclosure of two chip design flaws, Spectre and Meltdown, which affected Intel’s (INTC) and Advanced Micro Devices’ (AMD) x86 chips and ARM chips. Intel stock fell 9% between January 2 and 10.
February 2018 sell-off
As Intel stock recovered from this disclosure, there came a stock market sell-off in early February, which saw the NASDAQ Composite Index (NDX-INDEX) fall 8.2% between February 1 and 8. While the cause of the fall was not known, it was suggested that fears of an increase in the interest rate by the Federal Reserve triggered the sell-off. The sell-off sent INTC’s, Qualcomm’s (QCOM), and Texas Instruments’ (TXN) stocks down 11.2%, 8.5%, and 11%, respectively.
March 2018 sell-off
The February sell-off was followed by a March sell-off triggered by US President Donald Trump’s March 22, 2018, announcement of tariffs on Chinese imports, which created an environment for a possible trade war between the two countries. This saw the NASDAQ Composite fall 352 points and the iShares PHLX Semiconductor ETF (SOXX) fall 12 points between March 22 and 23.
QCOM and TXN haven’t yet completely recovered to their March 20, 2018 levels. Even 2016, 2017 top performers Micron (MU), AMD, and NVIDIA (NVDA) haven’t returned to their March 20 levels. The only exception is Intel, which has completely recovered from the fallout and soared.
This shows that the current weakness in the semiconductor industry isn’t because the industry is suffering a slowdown but because of alleviated trade tensions between the United States and China. Buying activity in semiconductor stocks has slowed, as this industry is at the center of the trade tensions.
Does this market weakness present an opportunity for short-term traders? We’ll answer this question next.
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