Semiconductors Winners And Losers As Of Q2 2022

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The year 2022 has not been kind to most stocks thus far, semiconductor stocks included. Semis as a group ended the first quarter well into negative territory, making it the worst quarter since early 2020. However, some stocks got hit harder than others. Some semis even showed signs of strength heading into Q2 2022. Still, there’s no getting around the fact that the outlook for semis has deteriorated. Why will be covered next.

Semis have taken a step back

Semis started 2022 with momentum on its side, having ended 2021 on a strong note with big gains in Q4. However, as pointed out in a previous article, there was reason to think semis were heading for a more difficult time in 2022. As it turned out, stocks suffered major losses in Q1 2022. Tech was hit harder than most and semis did not escape the fallout.

For instance, the Invesco QQQ Trust (QQQ) lost 8.88% and the SPDR S&P 500 ETF (SPY) lost 4.91% YTD. The latter was held up by a strong performance from the energy sector, offsetting weakness in other sectors. In comparison, semis underperformed. For instance, the iShares PHLX Semiconductor ETF (SOXX) fell 12.73% in the first quarter of 2022, the opposite of what happened in the preceding quarter when SOXX gained twice as much as SPY or QQQ.

Some semis struggled more than others. A breakdown of the performance of individual stocks shows how. The companies present in SOXX are Nvidia (NVDA), Broadcom (AVGO), Advanced Micro Devices (AMD), Intel (INTC), Qualcomm (QCOM), Texas Instruments (TXN), Microchip (MCHP), Marvell (MRVL), Micron (MU), Applied Materials (AMAT), Lam Research (LRCX), KLA Corp (KLAC), NXP Semiconductors (NXPI), Analog Devices (ADI), TSMC (TSM), ASML (ASML), On Semiconductor (ON), Teradyne (TER), Skyworks (SWKS), Monolithic Power Systems (MPWR), Entegris (ENTG), Qorvo (QRVO), STMicroelectronics (STM), Wolfspeed (WOLF), Lattice Semiconductor (LSCC), MKS Instruments (MKSI), Synaptics (SYNA), Universal Display (OLED), United Microelectronics Corporation (UMC) and ASE Technology (ASX). The table below shows the gains or losses for each company.


Weight %

Change – 12 months

Change – 6 months

Change – 3 months

Change – 1 month

Change – YTD





































































































































































































































Source: iShares

Who is hot and who is not

SOXX lost 12.7% in Q1, but a number of semis were even worse off. For instance, LRCX and TER both lost more than 25% in Q1, nearly twice as much as SOXX, but the stock that fell the most out of the ones listed above is SYNA with a YTD loss of 31%. However, it’s worth mentioning that the Q1 decline was preceded by a major rally in Q4. The stock is still trading above where it was at the start of Q4 with a gain of 11% in the last six months.

SYNA has gained 44.4% in the last twelve months. A similar pattern can be observed in other stocks. For instance, TER and AMD lost in Q1 much of what they gained in Q4, but the latter is still up 34.8% after one year. Stocks like LSCC and LRCX suffered heavy losses in Q1, but they are not that far behind once you account for the big gains in Q4.

There were a few stocks that bucked the trend. For instance, OLED and WOLF were the two stocks that did not end Q1 in the red, if only just barely, with YTD gains of 1.87% and 1.16% respectively. It should be noted that unlike other semis, the two did not rack up huge gains in prior quarters. OLED, for instance, finished 2021 deep in the red with a loss of 28% in what was a very strong year for semis, more than all the other stocks above. Still, OLED and WOLF are showing signs of momentum heading into Q2. The latter and NVDA are the only two with double-digit gains in the last month.

At the other end of the spectrum, the two weakest stocks showing not even a hint of momentum are SWKS and QRVO. The latter has suffered a loss of 35.67% in the last twelve months, more than all the other stocks in the list. Both are stuck in clearly defined downtrends, having racked up more and more losses in each of the last four quarters.

Most semis lost ground in 2022, but the stocks showing the greatest amount of resilience were AVGO, ON, and NVDA in particular. They all managed to retain most of their prior gains, displaying underlying strength with their ability to quickly get up after getting knocked down. AVGO ceded 5.37% YTD, but it has gained 32.3% after one year. ON is down 7.8% YTD, but it’s still up 45.98% after one year. NVDA has lost 7.2% YTD, but it has still appreciated by 97.56% after one year. NVDA also ended 2021 with a gain of 125%, more than anyone else in SOXX.

Why the outlook has worsened for semis

It’s worth mentioning that most of the semis mentioned are still posting strong gains in terms of earnings growth, even if their stock has struggled in 2022. According to a recent forecast from WSTS, the worldwide semiconductor market is expected to grow by 10.4% YoY to $613.5B in 2022. In comparison, the market grew by 26.2% YoY to $556B in 2021. The semiconductor market is still in good shape.

However, many semis can expect solid if not strong earnings growth, but their stocks have nonetheless been weighed down by other factors. As mentioned previously in prior articles, semis are facing a number of potential headwinds even if semiconductor demand remains healthy. For instance, supply chain disruptions are a potential pitfall to quarterly earnings, possibly made worse by COVID-19 lockdowns. The rapid expansion in fabs has raised the prospect of a supply gut in the future.

Yet the prospect of a drastic change in policy by the Federal Reserve was singled out as the biggest headwind confronting semis in 2022. Tech stocks, semis included, were one of the biggest beneficiaries of the liquidity unleashed by the Fed in recent years, especially after the outbreak of COVID-19, making Fed policy a powerful tailwind for semis. The excess liquidity more often than not had nowhere else to go than stocks, pushing up prices.

However, spiking inflation has forced the Fed to accelerate its timetable as to when to tighten. The Fed could go from boosting stocks by injecting liquidity to doing the opposite, in effect becoming a headwind for stocks. If anything, the Fed has become even more hawkish in 2022, which increases the prospect of even tighter conditions than previously anticipated, including much higher interest rates than expected and a faster unwinding of QE with a reduction of the Fed balance sheet.

The geopolitical situation has also gotten worse. In Q1, tensions turned into outright war in Europe. The armed conflict opens the door for all sorts of negatively repercussions. Many semis, especially suppliers of semiconductor manufacturing equipment, have been confronted with supply chain disruptions, which in certain cases has directly impacted the bottom line. For instance, transportation links have become a bottle neck, leading to delays in shipping and qualifying equipment in fabs. Shortages of certain semiconductor materials have also popped up.

But the biggest fallout from the war could be even higher inflation, which in turn could force the Fed to become even more hawkish to the point that a rapid slowdown in economic growth becomes unavoidable. In the short term, Fed changes do not necessarily have to be a problem for stocks. In the early stages of tightening, stocks actually tend to do quite well based on past history. But if the Fed has to fight higher and higher inflation by removing liquidity and by imposing interest rates that are much higher than seen in recent years, stocks are unlikely to do well in the long run.

Investor takeaways

Not everyone has the same approach when it comes to stocks. Some look for stocks with momentum, betting that the stocks will continue in whatever direction they are heading for. In this case, NVDA could be at the top of the list. Others look for stocks that are down big, betting that the stock will eventually rebound, if only because the stock is so oversold. In this case, OLED could be an option.

Another group may be placing bets based on some industry trend like 5G, in which case QCOM may be what people are looking for. A fourth group may be drawn to stocks trading at a relatively low multiple. This group may prefer a stock like MU. Charts could also have an influence in the decision-making process. If so, then QRVO could be interesting for some. There are different ways to skin a cat when it comes to semiconductor stocks.

However, no matter which stock people go for, the reality is that prospects for strong gains like in the last three years has gotten significantly worse due to recent events. Factors like supply chain problems, possibly in combination with COVID-19, are still out there, but inflation could turn out to be the one with the greatest sway on the direction of semis in 2022.

Inflation was already problematic before, but it has gotten much worse in the first quarter of 2022 with the cost of energy and food spiking due to the war in Europe. More importantly, spiking inflation will force the Fed to make more drastic changes to its policy due to its mandate on inflation, which has the potential to move stocks like nothing else can.

The Fed has already started to tighten, but spiking inflation puts the Fed in a bad position. If it does nothing, inflation keeps going up. If it raises rates to fight inflation, the economy slows down. If the economy slows down too much, the Fed could be forced to resort to renewed stimulus due to its other mandate. This would keep the economy afloat, but inflation would go unchecked. The silver lining is that renewed stimulus would benefit stock prices, but the Fed would need an excuse as to why stimulus is needed and inflation should not be a priority.

Inflation has the potential to drive policy to the point that it takes down the economy and the stock market. The yield curve has already started to invert, which is a bad sign and at the very least suggests the possibility of a recession is now higher. The last time the U.S. had a major problem with inflation, the Fed funds rate got as high as 19-20%.

It’s highly unlikely the economy and stocks could handle such rates. Unlike the seventies, the U.S. no longer has little to no debt. Stocks have benefited greatly from bonds yielding little to nothing, which forced capital into stocks. If interest rates get to the point that they offer a decent enough return, capital will start fleeing their current hideouts and stocks will be negatively impacted.

What this suggests is that people ought to be more restrained in deploying new capital because the risk that something goes wrong has gone up. Up until quite recently, Fed policy was such that stocks had nowhere else to go than up due to all the liquidity coming in. In this environment, it did not matter all that much which stocks were picked. The most important thing was that you had to be into stocks. But if the Fed is no longer there to push things up and could even be pushing stocks down, picking the right stocks becomes all the more important.

It’s necessary to be more discerning when it comes to stocks with Q2 upon us. Stocks have to justify why they deserve a higher valuation than the one they already have with less liquidity available. In addition, stocks trading at lofty valuations are likely to have a harder time going forward, especially if the market continues to decline. Those with solid earnings growth prospects and trading at fair valuations should hold up better.

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