What happened
Semiconductor stocks tumbled in afternoon trading Monday. By close of trading, Qualcomm (NASDAQ: QCOM) stock lost 7.5% and Micron Technology (NASDAQ: MU) was down 7.6%. Advanced Micro Devices (NASDAQ: AMD) suffered a smaller, 5% loss.
Why these stocks are falling is the question.
Image source: Getty Images.
So what
There wasn't any particular "bad news" to explain the declines, after all -- no negative press releases from the companies themselves, no analyst downgrades, nor even so much as a lowered price target. The contrary would be more accurate.
While the geopolitical news these past two months has been anything but reassuring, according to an article appearing on Investors.com this morning, stock market analysts are nonetheless "pound[ing] the table," and encouraging investors to buy semiconductor stocks. Needham recommended Silicon Labs today, and Susquehanna Financial Group named Marvell Technology and Power Integrations as two of its favorite stocks (on a list that also includes AMD).
Separately, Goldman Sachs resumed coverage of yet another semiconductor stock -- Nvidia (NASDAQ: NVDA). Goldman may not have quite come out and recommended Nvidia stock, but the analyst did predict a "proliferation" of artificial intelligence and machine learning technologies that could "drive earnings growth" for leaders in this industry. And although Goldman assigned Nvidia only a "neutral" rating today, it also gave Nvidia a $245 price target, indicating the stock has as much as 15% upside from today's prices.
Now what
15% upside in a semiconductor stock that costs more than 60 times earnings already?
If that's the case, then you have to figure it makes AMD an even better bet at 47 times earnings (and a faster projected earnings growth rate than Nvidia has -- 25% versus just 21%, according to data from S&P Global Market Intelligence). Qualcomm at less than 20 times earnings, and Micron at less than 14 times earnings, also look quite tempting at current levels.
Perhaps instead of selling all these semiconductor stocks, investors should actually be buying -- or at least buying the cheap ones.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices, Nvidia, and Qualcomm. The Motley Fool recommends Marvell Technology Group and Silicon Laboratories. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
