Semiconductor Stocks Surge Amidst Strong Demand

Qualcomm, Nvidia, AMD Outperform the S&P 500

Qualcomm (QCOM), Nvidia (NVDA), and Advanced Micro Devices (AMD) are among the chip stocks which have surged this month as demand continues to outstrip supply. That imbalance is driving earnings and revenue growth for semiconductor companies. Investors, in turn, are driving share prices of these companies higher.

Nvidia’s third quarter earnings report lifted the sector last week when it bested Wall Street’s revenue and earnings forecast. The graphic chip maker’s growth is being driven by video games and digital services.

Earnings Growth to More Than Double

Analysts forecast that earnings for chip and chip equipment companies in the S&P 500 increased 56% year-over-year in the third quarter. That is well above the 40% growth expected for the S&P 500 as a whole.

Demand for chipmakers’ products is so strong that they have not been able to keep up. For months, a shortage of semiconductors has hurt manufacturers’ ability to churn out cars, electronics, and home appliances.

Looking Ahead

Supply constraints in the semiconductor industry were originally expected to ease in the middle of 2022, but now chip companies are saying they could persist throughout next year potentially even spilling into 2023.

Meanwhile, analysts are betting that recovery from the pandemic will pick up speed as the number of COVID-19 cases fall and supply-chain delays ease. As a result, demand for chips is likely to remain strong. Investors will be watching carefully to see if chip stocks will continue to benefit from the supply-demand imbalance.

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