Obviously, the market could have done without Nvidia’s stumble after the bell on Thursday.
The problem, from where I’m sitting anyway, isn’t so much that everybody is worried about a future where morons aren’t mining cryptocurrency anymore. Rather, the issue is that when you consider Nvidia’s guidance with Applied Materials’ revenue forecasts and then you connect the dots with signs of waning appetite for iPhones, you end up wondering about demand for electronics more generally. In a world where it’s all about Tech, collapsing demand for things like servers and mobile devices is really – really – bad news.
Nvidia was removed from Goldman’s Conviction list this morning and while it still carries a Buy rating, the commentary in the note isn’t particularly inspiring from a macro perspective for the extent to which it seems to say more about the overall environment than it does about the company itself.
“While we view the inventory correction in Gaming as a one-time reset as opposed to a change in the long-term growth profile, we believe it could take a few quarters before the market regains confidence in the growth trajectory of the business, especially given the weak economic backdrop which could adversely impact Gaming GPU sell-through and prolong the digestion process”, Goldman writes, before noting that when it comes to the stock they “remain Buy-rated as our view that Nvidia has access to one of the best growth opportunity sets in Semis and that it has a sustainable competitive lead within remains unchanged.”
Whatever the case, the shares were obviously crushed after hours on Thursday and it looks like Friday is going to be pretty bad.
Semis are attempting to rebound off the worst month since 2010 (SOX dove 12% in October) and the Nvidia and Applied Materials news isn’t going to help.
All manner of related names were rocked overnight in Asia. Tokyo Electron, for instance, looks like it had a terrible session, falling more than 4%.
Here’s the MSCI Asia Pacific InfoTech index which, although off the October lows, is still down a not-at-all-healthy ~25% from the highs.
You get the idea. This is exacerbating late-cycle concerns and probably raises the stakes for the Trump-Xi meeting at the G20 because as Bloomberg gently reminds you, “China is the biggest consumer of semiconductors and home to a crucial part of the world’s electronics supply chain.”