雅虎香港財經 3 Sorry Semiconductor Stocks to Sell in May While You Still Can
The semiconductor boom has rewarded many investors who picked them up before the latest AI-fueled surge. Though there’s still value (and room to run) for many of the AI chip stocks, there are also the overheated ones that may be vulnerable to a correction at some point in the near future. Undoubtedly, the AI boom is still on a healthy footing, but as investors, we should always be ready for turbulence, especially after a period of pretty pronounced gains.
Though it’s quite the stretch to refer to the following three semiconductor stocks as “sorry,” I do view them as getting just a tad too overbought and perhaps richly-valued to consider adding to a position on strength.
So, if you’re looking to lighten up with some of the chip plays in your portfolio, perhaps the following are worth checking in with. Are their recent runs justified by recent developments? If not, it may be time to add them to your semiconductor stocks to sell list.
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Micron (MU)
Memory chip maker Micron (NASDAQ:MU) has benefited greatly from the boom in AI-capable hardware. Though not as euphoric as Nvidia (NASDAQ:NVDA) GPUs, high-bandwidth memory chips have acted as a solid “supporting act” of sorts to the ongoing AI boom.
Undoubtedly, Nvidia stock’s recent blast past $1,000 per share suggests the AI boom is far from over. As this next phase of AI hardware upgrades kicks off, look for Micron to keep cashing in as buyers continue handing over cash for the very best memory hardware. And with Samsung recently encountering issues with its memory chips, Micron may be able to sprint ahead as its top rival stumbles.
Micron also recently hiked its capital expenditure expectations for the year to around $8 billion, up from the original $7.5 billion. The ongoing AI demand boom is a major reason behind the slight 6.7% uptick in spending.
Indeed, things look bright for Micron in the second half. However, there’s only one problem: It’s no longer a secret that the company is an early beneficiary of the AI hardware boom. At writing, MU stock is near a fresh all-time high after soaring over 78% in just the past year. Though there are prominent catalysts, I’m not comfortable chasing such a parabolic move in Micron.
Broadcom (AVGO)
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Broadcom (NASDAQ:AVGO) is another semiconductor firm that’s stood remarkably tall in the past two years, surging about 141% in the timespan. The massive multi-year breakout may very well follow in the footsteps of Nvidia, which has doubled up many times in recent years. However, I can’t say I’m itching to buy AVGO stock while expectations have steadily crept higher.
Sure, a vast majority of Wall Street analysts remain incredibly bullish (especially following its enabling AI infrastructure event), and the stock isn’t drastically expensive at 29.9 times forward price-to-earnings (P/E).
However, AVGO stock seems to have already been a top semiconductor stock to play the AI boom for quite some time. As such, I’d much rather wait for a pullback before punching a ticket. Though a “core AI” name, as Oppenheimer previously suggested, I’d much rather be in a hyper grower like Nvidia than a Broadcom at these levels, even if you’re paying a loftier multiple.
iShares Semiconductor ETF (SOXX)
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Finally, we have the iShares Semiconductor ETF (NASDAQ:SOXX), which may be ripe for profit-taking if you’re looking to take chips more broadly off the table. At writing, SOXX shares are barely at a new all-time high of $238 and change, close to the highs it made back in early March before shares tumbled more than 16%. Though SOXX could be in for a heated summertime breakout, I’d rather wait and see.
The exchange-traded fund (ETF) is home to numerous hot, potentially overheated semiconductor stocks that may need a cooling period. Most notably, SOXX owns a good chunk of Broadcom (around 7.9% of the holdings) and Micron (about 5.2%), two semi-stocks that are my top profit-taking candidates right here.
Undoubtedly, the SOXX could go sideways from here for a few months rather than endure another painful correction. Either way, I’d much rather be a net buyer of the best-in-breed semiconductor stocks (or maybe the relatively cheap ones) right here than the broader basket.
On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.
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