Global technology stocks plummeted, and foreign media analysis named Huida, Advanced Micro Devices, Broadcom, Micron and TSMC as still having great investment value. (Reuters photo)
[Financial Channel/Comprehensive Report] The U.S. Democratic Party won control of the House and Senate in the midterm elections, triggering market concerns about the prospects of building AI data centers. Technology stocks crashed on Thursday. As the stock market plummets, the market has raised questions about whether it is an appropriate entry point. Foreign media analysis named Huida, Advanced Micro Devices, Broadcom, Micron and TSMC, saying that despite the plummeting stock prices, these five companies still have strong investment value.
When the semiconductor industry was booming in May this year, Barron's warned that the boom in chip stocks "won't last forever." It is not good news for the market if "Barron's" prediction comes true, but if investors can choose individual stocks wisely, they will have a more attractive entry point.
The iShares Semiconductor ETF (SOXX) plunged 9% on Thursday (5th), which was the fifth decline in the past six trading days, dragging the S&P 500 index down 3.2%. The Nasdaq index, which is dominated by technology stocks, retraced as much as 4.3% on the day.
SOXX has fallen 28% since early October and is down 37% from its all-time closing high set on June 22, and no company in the semiconductor industry has been spared.
The PC market is in depression, which makes life difficult for Intel, because about half of the company's revenue comes from PC chips. Since Intel announced the shrinkage of its PC business in the third quarter last week, its stock price has plummeted 42%; smartphone sales this year have also been weak, putting pressure on chip suppliers such as Qualcomm and ARM. Although both companies released financial reports that exceeded expectations, there are also some shortcomings. The stock prices of the two companies fell by 11% and 12% respectively on Thursday.
The most valuable chipmakers rely on heavy investments in AI data centers by hyperscale data center operators. Huida, Broadcom and Advanced Micro Devices supply AI processors, while Micron, SK Hynix and Samsung provide memory.
Democratic victories in the midterm elections, especially in areas with dense data centers, have Wall Street worried that the pace of AI construction may be slowed. Jefferies analysts cut their forecast for new data center capacity in 2030 by about 8% in a research note on Thursday. UBS said that 30% of the capacity originally planned to be put into use in 2028 will be under threat.
The entire industry faces supply constraints that, no matter how great the demand, will limit some companies' earnings. Qualcomm warned in its profit report that higher component costs are affecting the entire supply chain, including wafer manufacturing, assembly, testing and advanced packaging.
The good news is that even if the chip rush since early 2026 has subsided, the industry's fundamentals remain attractive. Analysts polled by FactSet predict SOXX's earnings will surge 51% next year to $10.57 a share, with earnings expected in 2026 of $7. At the same time, valuations have fallen sharply. In June this year, SOXX's price-to-earnings ratio was once as high as 33 times. It has now fallen back to 16 times, reaching its lowest point since 2023 and continuing to fall.
In May of this year, when chip stocks continued to rise and a sell-off seemed inevitable, "Baron's" recommended five stocks. With the collapse of technology stocks, "Baron's" reported that five companies, Micron, Micron, Broadcom, Micron and TSMC, still have strong investment value.
First of all, AI is still the largest growth driver of the semiconductor industry, and chips used in PCs, smartphones and even cars are far from having such great potential. In Intel's lower-than-expected financial report, the company's data center and AI division revenue increased 78% year-on-year in the same quarter.
Advisors Capital portfolio manager JoAnne Feeney pointed out that people's concerns about the total collapse of AI investment may be exaggerated. Governments are eager for job opportunities and tax revenue. If companies take appropriate environmental protection measures and pay for their own electricity, I believe they will welcome data centers.
Feeney said potential delays in data center construction were the main reason behind the sell-off, but at worst they were delays. The valuations of some companies have become more attractive as a result, Huida and Broadcom are two of them. Huida is the world's second-largest company by market capitalization. Its price-to-earnings ratio was only 13 times when the market opened on Thursday, which is 30% lower than the price-to-earnings ratio of the S&P 500 Index. Broadcom's price-to-earnings ratio was less than 16 times.
Grasp the economic pulse with one hand. Click here to subscribe to Free Finance Youtube Channel
