Last month, the U.S. Department of Commerce imposed rules to cut-off China’s supply to key chips and components for supercomputers. This has put U.S. companies under heavy restrictions to export machinery to Chinese companies that are manufacturing chips of a certain sophistication.

However, this move is expected to create near-to-medium-term volatility in the semiconductor industry, especially in the earnings of U.S. companies with considerable exposure to the Chinese market.

Moreover, following strong growth in the first half, global semiconductor sales have slowed down recently due to macroeconomic headwinds. The Semiconductor Industry Association (SIA) announced that September sales had dropped 3% year-over-year, marking the first drop since January 2020.

Given this backdrop, semiconductor stocks NVIDIA Corporation (NVDA), Advanced Micro Devices, Inc. (AMD), and Marvell Technology, Inc. (MRVL) are not safe investments now.

NVIDIA Corporation (NVDA)

NVDA is a global provider of graphics, computation, and networking solutions. The company operates through two segments: Graphics and Compute & Networking. The company’s products are used in gaming, professional visualization, datacenter, and automotive markets.

In September, the U.S. government blocked NVDA from exporting two of its top computing chips, A100 and H100 graphic processing units, to China for artificial intelligence (AI) work. The company stated that the ban is expected to impact its revenue by $400 million.

For the second quarter that ended July 31, NVDA’s revenue came in at $6.70 billion, up 3% year-over-year. However, its non-GAAP income from operations came in at $1.33 billion, down 56.9% year-over-year.

In addition, its non-GAAP net income came in at $1.29 billion, down 50.7% year-over-year, while its non-GAAP net income per share came in at $0.51, down 51% year-over-year.

Analysts expect NVDA’s EPS to decline 39.5% year-over-year to $0.71 for the fiscal third quarter ended October 2022. Its revenue is expected to decrease 17.7% year-over-year to $5.85 billion for the same quarter.

Over the past year, the stock has lost 52.6% to close the last trading session at $146.02. It has lost 17.9% over the past three months.

This bleak outlook is reflected in NVDA’s POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

NVDA has a D grade for Growth, Stability, and Value. Within the Semiconductor & Wireless Chip industry, it is ranked #77 of 91 stocks.

Click here for the additional POWR Ratings for NVDA (Momentum, Sentiment, and Quality).

Advanced Micro Devices, Inc. (AMD)

AMD operates as a global semiconductor company through its Computing and Graphics; and Enterprise, Embedded, and Semi-Custom segments. It serves OEMs, public cloud service providers, original design manufacturers, independent distributors, online retailers, and add-in-board manufacturers.

On November 3, AMD unveiled the AMD Radeon RX 7900 XTX and Radeon RX 7900 XT graphics cards. The gaming graphics cards use an advanced AMD chiplet design. However, there might still be some time before significant gains can be realized from the new products as they are expected to not be available before December.

For the third quarter that ended September 24, AMD’s net income came in at $66 million, down 92.8% year-over-year. In addition, its non-GAAP operating expenses increased 46.9% year-over-year to $1.52 billion, while its non-GAAP earnings per share came in at $0.67, down 8.2% year-over-year.

AMD’s revenue is expected to decrease 4.3% year-over-year to $5.64 billion for the quarter ending March 2023. Its EPS is expected to fall 37.1% year-over-year to $0.71 for the same period.

Over the past year, the stock has lost 57.5% to close the last trading session at $63.85. It has lost 36.2% over the past three months.

AMD’s POWR Ratings reflect its poor prospects. It has an overall F rating, which indicates a Strong Sell. The stock has an F grade for Stability and a D for Growth, Sentiment, and Quality. Within the same industry, AMD is ranked #89.

Click here to access the additional POWR Ratings for AMD (Value and Momentum).

Marvell Technology, Inc. (MRVL)

MRVL designs, develops, and markets analog, mixed-signal, digital signal processing, embedded, and standalone integrated circuits. The company offers Ethernet solutions and storage products.

It was reported that Marvell was eliminating some roles in China as part of a realignment of its global research and development investments.

For the fiscal second quarter ended July 30, MRVL’s total non-GAAP operating expenses increased 17.8% year-over-year to $431.60 million. Net cash used in investing activities rose 239.2% from the prior-year quarter to $129.90 million. MRVL’s total current liabilities came in at $2.16 billion for the period ended July 30, 2022, compared to $1.39 billion for the period ended January 29, 2022.

Its EPS is expected to come in at $0.59 for the fiscal third quarter ended October 2022. Analysts expect its revenue to amount to $1.56 billion for the same quarter.

The stock has declined 28.4% over the past three months to close its last trading session at $39.79. It has fallen 54.5% year-to-date.

It’s no surprise that MRVL has an overall D rating, equating to a Sell in our proprietary rating system. The stock has a D grade for Stability and Quality. MRVL is ranked #79 in the same industry.

Click here to see the additional POWR Ratings for MRVL for Value, Growth, Momentum, and Sentiment.

NVDA shares were trading at $138.93 per share on Wednesday afternoon, down $7.09 (-4.86%). Year-to-date, NVDA has declined -52.73%, versus a -19.75% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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