The semiconductor sector led Tuesday’s losses, with Nvidia losing nearly $110 billion in market cap. Christopher Danely, Citi head of US semiconductor research, joins Catalysts Hosts Seana Smith and Madison Mills to discuss the recent weakness and what it says about the chip sector. “Semis have always been quite a volatile space. I think it’s still one of the best sectors on the year in terms of performance. What happened in the last couple of days was you had this big slew of automotive data points that were very negative… [Autos represent] like 10 to 15% of the semiconductor sector. So not an insignificant part.” The chip sector is coming down from last week when Micron (MU) earnings sent chipmaker stocks higher. “Micron one of the leading AI companies, reported last week lots of upside there. Obviously, Nvidia (NVDA) [and] AMD (AMD). They’ve all been reporting upside. So it’s like this push-pull. AI is now about 30% of semis. So that’s clearly leading the charge… Semis are still up, I think, 25% [to] 30% on the year. So it’s a pretty decent year. It’s just there’s some volatility. There’s some parts that are good and some parts that are not so good.” “If you look at the AI space and where the bulk of the spending is coming from, it’s the cloud companies. So the big four. That’s Amazon (AMZN), Microsoft (MSFT), Google (GOOG, GOOGL), and Meta (META)… they’re responsible for the bulk of the spending. But then you also have other companies that are starting to spend more on AI, like Tesla (TSLA).” “For investors out there, number one, you really want to look at the CapEx of what the big four cloud companies are doing. It seems like their CapEx has been moving up every quarter. That’s the thing that we’re going to be watching most during earnings. But then you also have other companies like Tesla that are getting into the space. But really, I would say focus on the big four and, in particular, what the outlook is for next year.” He explains that the “main AI companies in semis” are Nvidia, followed by Broadcom (AVGO) and AMD. “You’ve had consistent upside from Broadcom, from Nvidia. You know that should presage very good spending by those cloud companies.” The analyst names Analog Devices (ADI) as a recent top pick as part of a strategy to “get a little more defensive really from a broader space on semis because of that volatility… Analog Devices is known as a defensive stock. Remember we’re cautious on the automotive space and a couple of others.” He explains he also has Buy rating for Nvidia, AMD, and Broadcom.
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