The Chips are Down. ASML, Intel and Super Micro Computer Plunge. Is Nvidia Next? There is definitely a tale of two cities going on in chips. Nvidia, with its commanding lead in Generative AI, is one of the hottest companies on Wall Street. Nvidia’s year-over-year sales growth is a blazing 122.4%. (As the company laps a year of outstanding results, the 3rd quarter is expected to slow to 79% higher than a year ago.) At the same time, ASML, which almost tripled in share price over the last two years, just saw its worst day of trading in decades. ASML shares dropped $141.84/share yesterday (10.15.2024) after the company released a disappointing earnings report. Super Micro Computer shares are down -61% from the highs seen in March of this year. While there is a difference between the wildly popular generative AI (Nvidia) and semiconductors that are made for the automotive and industrial industries, the volatility – spectacular soaring and dramatic dives – originates from the same phenomenon. We’ve seen interstellar valuations crash land in other industries with impressive growth. Cybersecurity, cryptocurrency, electric vehicles and even the Magnificent 7 have seen colossal share price swings over the past five years. Is pricing a stock for the potential years down the road a good idea, or can too much happen in the interim? Here are the topics I’ll cover in this blog. Chips for the Auto/Industrial Industries (Intel, ASML) Generative AI and the Market Leader Nvidia Price, Earnings and Growth Potential Roadblocks And here is more color on each point. Chips for the Auto/Industrial Industries (ASML & Intel +) Semiconductors can be the canary in the coal mine, the harbinger of an economic slowdown that often begins with companies reining in their CAPEX. In the earnings press release from Oct. 15, 2024, ASML President & CEO Christophe Fouquet explained that “customer cautiousness” resulted in the company missing analyst expectations, although year-over-year revenue came in above the company’s guidance. ASML grew 12% to €7.5 billion net sales in 3Q 2024, with expectations for €8.8 billion to €9.2 billion in net sales for 4Q. Why was Wall Street so disappointed with ASML’s low double-digit growth? There was a pronounced drop in sequential net bookings. Quarterly net bookings dropped from €5.6 billion in Q2 to €2.6 billion in Q3. Demand weakness and rising inventory are pronounced in the manufacturing and auto industries. Auto sales have begun to moderate. Ford reported that there was a 2% decline in sales for the auto industry in the 3rd quarter. Tesla has been leading sales growth with its all-EV fleet for the past few years. However, even Tesla experienced only 6.4% increase in vehicle deliveries in the 3rd quarter of this year versus 2023. On August 16, 2024, S&P Global lowered Intel’s credit rating from A- to BBB+ with a negative outlook. Intel’s 2Q 2024 revenue was down -1%, and 3Q 2024 could drop -12% versus the same quarter in 2023. What is happening? In the 2Q 2024 earnings press release, Intel CEO Pat Gelsinger warned that “second-half trends are more challenging than we previously expected.” The company is implementing “spending reductions,” including some layoffs and delaying factories in Germany and Poland for two years. Many European countries, including Germany, France and the U.K., are expected to have flat economic activity in 2024, narrowly averting recessions. Economies are experiencing a slowdown in growth around the world. Generative AI and the Market Leader Nvidia As I mentioned at the top of this blog, AI is on fire, but the flames are certainly moderating. Nvidia’s 3Q 2024 revenue is expected to be 79% higher than a year ago. While quite impressive, that is a lot lower than 2Q’s 122.4% revenue growth or the 4th quarter of 2023, when revenue was up 265% year over year. Despite all this good news, Nvidia shares have traded in the same range since June. Why aren’t investors more excited about this stellar performance and the continued potential? Is it just a matter of valuation, or are there other concerns? (See below.) Super Micro Computer is another company that is benefitting from the Generative AI explosion. Super Micro Computer’s revenue was 143% higher in the June 2024 quarter compared to a year ago, putting it at the top of the Chip Stock Report Card in terms of revenue growth. (Email [email protected] if you’d like an updated AI & Chip Stock Report Card.) However, converse to Nvidia, Supermicro Computer’s shares are down more than half from the company’s March 2024 highs. What happened? The Department of Justice is looking into accounting irregularities at the company, according to The Wall Street Journal. Hindenburg Research first reported the “accounting manipulation” on August 27, 2024. Just one day later, Super Micro announced that the company would delay filing its annual report, while it assessed the “design and operating effectiveness of its internal controls over financial reporting.” Accounting concerns will almost always spook investors to sell. Price, Earnings and Growth Many chipmakers are showing outstanding sales growth. Micron’s revenue surged 82% in the most recent quarter. Broadcom, Arm Holdings and AppLovin’s revenue are all up 47%, 47% and 44%, respectively, from 2Q 2023. The challenge is that share prices are light years above frothy in the semiconductor space – into the interplanetary realm. Should a company like Nvidia, with $30 billion in net income, be worth $3.43 trillion? Micron is worth $116 billion and Advanced Micro Devices’ market cap is $254 billion, while both companies brought in less than $1 billion in net income last year. Companies with higher growth, like these AI chipmakers, can command a higher price-earnings ratio. However, PEs of 63 (Nvidia), 167 (Micron), 143 (Broadcom), and 200 (AMD) are pricing for earnings years beyond today. When sights are set that far out, there are a lot of potential sinkholes that could prevent expectations from being fully realized. When a company is being priced for sales too far down the road, any speedbump can cause an oversized correction. As an example, the Magnificent 7 companies, most of which are rich in AI, doubled in share price in 2023. However, these same companies were some of the worst performers in 2022, when the NASDAQ Composite Index sank -33%, compared to the S&P500’s -19.44% retreat. Nvidia’s share price dropped -50% in 2022. Potential Roadblocks 2022 was a year when recession was narrowly (and unexpectedly) averted in the U.S., as the Federal Reserve began their aggressive rate-hiking cycle. Macro trends can always trip up a company or industry. We’ve seen supply chain issues disrupt a company’s ability to keep up with demand. War and international conflict can make shipping difficult. There was a Red Sea shipping crisis in January of this year that impacted vehicle deliveries from Tesla and Stellantis. Tesla’s share price dropped -40%, before recovering some of the losses. Shares are still down -11% on the year. Crowdstrike is moving beyond its Microsoft Blue Screen Disaster, but share prices are still down $100/share from the highs before the infamous debacle. Cyberattacks are always a concern with any trillion-dollar company (or country). Big U.S. Technology is a perennial target. The U.S. is very concerned about foreign countries gaining access to our proprietary lead in technology and AI, and limits certain exports. Increased international tensions, particularly between the U.S. and China, could make this challenge more pronounced. Most chipmakers have factories in China or Taiwan. Nvidia chips are made at Taiwan Semiconductor. If China invades Taiwan, Nvidia’s trajectory will do an about-face overnight. There has also been a discussion about whether AI is paying off for the customers. Nvidia makes the case that the company can improve efficiencies and drive down power costs for companies, which can amount to a lot of savings. Goldman Sachs points out that AI will increase data center power needs by 160% in just three years. According to the report, “On average, a ChatGPT query needs nearly 10 times as much electricity to process as a Google search.” Microsoft is resurrecting the 3-Mile Island nuclear power plant to help deal with its energy needs. Bottom Line Most of Nvidia’s revenue growth is coming from the company’s data centers and Nvidia’s market leadership in generative AI (up 154% year over year). So far, everything is coming up roses for the company. All of the chipmakers would like to sit in the halo of AI. Nvidia is stealing most of the spotlight. However, when the economy slows down, and companies see their sales contract, chips are some of the first expenses on the chopping block. Intel and ASML have seen a pullback in their orders. Will Generative AI be on the expense chopping block anytime soon? Be careful buying high. The growth of AI is priced into most chipmakers. Even with the share price pullback, ASML is trading with a price-earnings ratio of 46, while Intel’s P/E is 102. Simple dollar-cost averaging can help Main Street investors to gain exposure to this explosive industry, without the risk of watching their shares plummet in value. We offer a few more tricks for investing in AI at our Financial Freedom Retreats. Email [email protected] to learn more about attending our Oct. 18-20, 2024 Online Financial Freedom Retreat (this weekend!), or to receive pricing and information about my private coaching program and unbiased 2nd opinion of your current wealth and retirement plan. Join us at our online Oct. 18-20, 2024 Financial Freedom Retreat and our Bond/What's Safe Master Class Oct. 26, 2024. Learn how to: * Invest in hot industries, such as Nvidia and artificial intelligence, * Hedge against a weaker dollar, * Invest and compound your gains, * Green your retirement plan, * Easy and efficacious nest egg strategies, * Get hot and diversified (including in artificial intelligence and EVs), * Evaluate stocks, * Keep an age-appropriate amount safe, and, * Know what's safe in a Debt World. You'll even discover how to save thousands annually with smarter big-ticket choices. Yes, it's a complete money makeover. Email [email protected] or call 310-430-2397 to learn more and register. Learn the 15+ things you'll master and read testimonials in the flyer on the home page at NataliePace.com. Register with friends and family to receive the best price. "Ten minutes into the first day I was already much smarter about investing than I ever thought I would be in my life and I knew I was in exactly the right place at this retreat. I am amazed at how EASY and FUN it is to make my money work for me and those I love. I think this kind of information should be compulsory in schools. I wish I'd learned this sooner." CM If you’d like an unbiased 2nd opinion on your current wealth plan, email [email protected] for pricing and information. ![]() Join us for our Online Oct. 18-20, 2024 Financial Freedom Retreat. Email [email protected] or call 310-430-2397 to learn more. Register with friends and family to receive the best price. Click for testimonials, pricing, hours & details. ![]() Join us for our Restormel Royal Immersive Adventure Retreat. March 7-14, 2025. Email [email protected] to learn more. Click for testimonials, pricing, hours & details. There is very limited availability. Register now to ensure that you get the exact room you want. (There may not be an opportunity to register after Sept. 15, 2024.) This retreat includes an all-access pass to all of our online training for a full year for two, and three 50-minute private, prosperity coaching sessions. Much more affordable than you might think. Email [email protected] to learn more. ![]() Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The ABCs of Money and The Power of 8 Billion: It's Up to Us, and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 6th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is are the most recent releases of these books. Follow her on Instagram. Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden. Check out Natalie Pace's Substack podcast on Apple and Spotify. Watch videoconferences and webinars on Youtube. Other Blogs of Interest Will Insurance Companies & Homeowners Weather the Hurricanes? 9 Money Secrets of the Ultra Wealthy. Housing & Budgeting Solutions. Will Boeing Be Booted Out of the Dow Jones Industrial Average? Arkansas Sues Temu for Data Theft. We Must Be the Boss of Our Money. Why? Oil Prices Tumble. Why? Sweepstakes for the Release of The ABCs of Money. 6th Edition. Should You Go Conservative or Aggressive? 5% Yield without those Pesky Paper Losses. The Dow Drops 1400 Points. Fast Fashion. Fossil Fuels. Plastic Clothing. Atacama Desert Waste Dumps. Can Crowdstrike Recover from its Colossal Catastrophe? Featuring a Cybersecurity Overview. Fintechs and Brokerages that Fail are Not FDIC-Insured. Stocks Keep Hitting New Highs. Are You Thinking "Capture Gains?" Nvidia Volatility. Salesforce Drops. Election Years With Negative Yield Curves = ?. 5 Green Tips for Clean Beaches Week. Nio Sales Expected to More Than Double in 2Q 2024. So, You Think You Want to Be a B&B Owner... Artificial Intelligence and Crypto Scam Alert by the SEC. Netflix Evicts Unpaid Viewers. Empty Theaters. Retiring Soon? Start Planning Now. 2024 Rebalancing IQ Test. Answers to the 2024 Rebalancing IQ Test. May is National Bike Month. Paris and Amsterdam are the Stars. AI, Gold & Copper are on Fire. Sunpower Doubled. Sell in May and Go Away? What About the Election? Vacations that Color Our World Forever. The Magnificent 7 Drop to the Fantastic 5 9 Inflation, Budgeting, Debt Reduction and Investing Solutions. China & Russia Double Their Gold Holdings. 2024 Investment of the Year? The Reddit IPO. Meme Stock or Snap Land? Tesla's Factory in Germany Taken Offline by Activists. Bitcoin Sets a New Record High. The Importance of Rebalancing. Beyond Meat's Shares Surge. Quaker Oats' Pesticide Problem. Stocks are Flying High. Why Aren't Mine? Cut Your Tax Bill in Half. 9 Tips. Celebrity Jet CO2. Green Washing. The Facts. Some Solutions. Copper: Essential to the Clean Energy Transition. Uh. Oh. More Bank Trouble. Are Amazon, Square and Other Tech Companies Ripping Us Off? Housing. Unaffordable. What Works? Case studies and creative solutions. Don't Reach for Yield. Closed-End Funds. 2024 Investor IQ Test. Answers to the 2024 Investor IQ Test. Apple's Woes Drag Down the Dow. The Winners & Losers of 2023. Ozempic, Magnificent 7 & Beyond. 2024 Crystal Ball. The Underperforming DJIA, Full of Fossil Fuels and Forever Chemicals. A Spectacular Year for 3 of the Magnificent 7. The Best ROI* (Almost 40%!) & 7 Life Hacks That Save Thousands. Portugal Eliminates Tax Advantages for Ex-Pats. Earn $50,000 or More in Interest. Safely. Finally. WeWork's Bankruptcy. Half-Empty Office Buildings. Problems in our Personal Wealth Plan. Solutions for Unaffordable Housing. Cruise Ships Give Freebies to Investors. Should You Take the Bait? Should You Take a Cruise? Bonds. Banks. The Treacherous Landscape of Keeping Our Money Safe. 7 Rules of Investing 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) Lithium. Essential to EV Life. Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Are There Any Safe, Green Banks? 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. Which Countries Offer the Highest Yield for the Lowest Risk? Why We Are Underweighting Banks and the Financial Industry. Save Thousands Annually With Smarter Energy Choices Is Your FDIC-Insured Cash Really Safe? Money Market Funds, FDIC, SIPC: Are Any of Them Safe? My 24-Year-Old is Itching to Buy a Condo. Should I Help Him? The 12-Step Guide to Successful Investing. The Bank Bail-in Plan on Your Dime. Important Disclaimers Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations. ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience. Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Comments are closed.
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AuthorNatalie Pace is the co-creator of the Earth Gratitude Project and the author of The Power of 8 Billion: It's Up to Us, The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She is a repeat guest & speaker on national news shows and stages. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999. Archives
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