US Chip Giants AMD, NVIDIA, Qualcomm Start 2024 With Decline After Stellar Performance Last Year

U.S. chip stocks have begun 2024 with a decline, following a remarkable performance in the previous year, which marked the best surge since 2009.

What Happened: Major chip companies such as Advanced Micro Devices Inc AMD, Qualcomm Inc QCOM, and Broadcom Inc AVGO saw a drop of more than 2%, causing a 2.1% decrease in the PHLX semiconductor index on Wednesday, according to a report by Reuters.

This comes after a nearly 7% decline in the chip index since setting a new high on Dec. 27. The Federal Reserve's latest minutes from the December meeting showed that policymakers acknowledged that interest rates are likely at or near the cycle's peak, indicating a potential shift in monetary policy as the economic landscape evolves.

In 2023, the PHLX semiconductor index rose by 65%, driven by enthusiasm for artificial intelligence and expectations that the Fed would reduce interest rates. This performance surpassed both the Nasdaq and S&P 500, which gained 43% and 24% respectively.

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AI chip leader NVIDIA Corp NVDA tripled its stock market value to $1.2 trillion in 2023, making it the fifth most valuable company on Wall Street. However, it also faced a near 1% decline on Wednesday.

Why It Matters: Despite the recent downturn, Bank of America maintains a bullish stance on the semiconductor industry for 2024, even after a 65% gain in 2023.

In 2023, chip companies like Nvidia and AMD profited from the crypto boom, with their GPUs becoming crucial for applications like data centers, AI, and crypto asset creation.

However, escalating US-China trade tensions have added to the sector’s volatility. The White House’s directive to a leading European chipmaker signals these growing tensions, causing a significant dip in semiconductor stocks at the start of 2024.

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