Semiconductor stocks fall in May
The last few days have been a roller-coaster ride for semiconductor stocks for macroeconomic and company-specific reasons. The US-China trade war has brought the VanEck Vectors Semiconductor ETF (SMH) down 6.8% in the last 16 days, pushing the ETF into oversold territory with an RSI (relative strength index) of close to 30. The RSI looks at a stock’s trading volume and measures its momentum on a scale of 0–100. An RSI of less than 30 indicates that a stock is oversold.
Some of the stocks that have been hit the worst by the trade war were Qualcomm and Xilinx, which have fallen 4.1% and 9%, respectively, month-to-date. The two companies have high exposures to China and have been banking on 5G technology for future growth. However, higher tariffs imposed by the United States and China and a ban on Huawei came as a blow to Qualcomm and Xilinx. These stocks are trading far above their 52-week lows and have double-digit YTD (year-to-date) returns of 45.5% and 24.6%, respectively.
AMD outperforms market and industry
One chip stock that’s outperformed the market and industry is Advanced Micro Devices (AMD). AMD stock rose 4.5% in the first half of May, outperforming SMH and the SPDR S&P 500 ETF, which fell 6.8% and 1.4%, respectively.
AMD’s growth has once again made it the best-performing chip stock of 2019 with a YTD return of 51.7%, whereas the last few steep falls in Xilinx stock have lowered its YTD return to 25%. Back in March and early April, Xilinx outperformed AMD by making a new all-time high of $141.6.
So what’s driving AMD stock?
What’s driving AMD stock?
At a time when NVIDIA and Intel are reporting YoY (year-over-year) declines in data center revenue, AMD is reporting growth. It’s not that AMD is immune to the slowdown in data center spending but that the company is growing by increasing its market share.
AMD is also benefiting from Intel’s PC headwinds. For instance, AMD gained market share as Intel faced a CPU (central processing unit) supply shortage. Moreover, Intel’s CPUs are vulnerable to several hardware security flaws (such as Spoiler and ZombieLoad), which AMD can use as a marketing tool. AMD has maintained its 2019 revenue guidance of 8% growth, while Intel has lowered its guidance to a 2.5% fall, and NVIDIA has refused to give full-year guidance amid data center uncertainty.