This week’s rout in chip stocks is a buying opportunity for investors, according to Citigroup. “We think it’s time to double down on Micron as we believe the [dynamic random access memory] market will remain tight given the oligopoly,” analyst Christopher Danely wrote in a 24-page report, calling the stock Citi’s top pick. Chip stocks sold off this week amid a broader reckoning in the outperforming technology sector since mid-June. That weakness accelerated on the heels of a slack July jobs reports Friday and a surprise rate hike from the Bank of Japan that led many investors to ditch the yen carry trade, buying the yen and selling the dollar. SMH 1M mountain VanEck Semiconductor ETF over the last month Danely also blamed disappointing results from semiconductor and semiconductor equipment companies as contributing to the pullback in the sector. The VanEck Semiconductor ETF has slumped 21% over the last month. The San Francisco-based analyst added that “very high” expectations at the peak meant the PHLX Semiconductor Sector Index was trading at a 70% premium to the S & P, its highest valuation since 2008. Earnings estimates for calendar 2025 also declined 11%, due in part from disappointing results from Intel , NXP Semiconductors and Microchip Technology . Along with Micron Technology , Danely named Advanced Micro Devices , Nvidia and Analog Devices among his top buy-rated names. “AI and memory still driving the bus – we’re still positive,” he wrote. “Fundamentals from the AI and memory end markets (roughly 30% of semi demand) remain robust with AI [capital expenditures] increasing and DRAM pricing already better than expected in 3Q24.”
A robotic arm moves 300 mm silicon semiconductor wafers inside a sorting machine in a cleanroom at a Globalfoundries Inc. semiconductor fabrication plant.
Liesa Johannssen | Bloomberg | Getty Images
U.S.-headquartered GlobalFoundries announced Tuesday the opening of its $4 billion expansion fabrication plant in Singapore as the contract chipmaker expects “growth in demand for essential semiconductor chips.”
“I’m confident that over the next decade, this industry will double again,” Thomas Caulfield, president and CEO of GlobalFoundries, told CNBC in an interview ahead of Tuesday’s opening.
Some catalysts include “new and important applications, the whole AI and how that will change society” — which will require chips and create demand, he explained.
“Automotive seems to be staying strong. Cloud for artificial intelligence seems to be strong. Industrial is holding in there. Anything consumer related is still weak,” Caulfield said Monday.
Foundries are companies that are contracted by semiconductor firms to manufacture chips. GlobalFoundries makes semiconductors designed by the likes of Qualcomm, MediaTek and NXP Semiconductors, and serves approximately 200 customers globally.
Its chips are found in smartphones, laptops, automobiles, virtual reality systems, video game consoles, smart speakers, and are also used in AI and 5G.
The 23,000-square meterfab facility in Singapore will increase the company’s global manufacturing footprint and boost its ability to serve customers across its manufacturing sites in three continents, the press release said.
“As Singapore’s most advanced semiconductor facility to date, the expansion fab will produce an additional 450,000 wafers (300mm) annually, raising GlobalFoundries Singapore’s overall capacity to approximately 1.5 million wafers (300mm) each year,” it added.
GlobalFoundries acquired Singapore’s Chartered Semiconductor Manufacturing and took over its fabs in 2010.
The site’s current manufacturing capacity is 720,000 (300mm) wafers and 692,000 (200mm) wafers a year. Such wafers are the basic material for manufacturing chips.
The new facility will create about 1,000 “high-value” jobs in Singapore, of which 95% will include equipment technicians, process technicians and engineers, the company said. GlobalFoundries currently hires roughly 4,500 employees at the Singapore site.
“GlobalFoundries had a long partnership with the Singapore government. The Singapore government has industrial policies about bringing high tech manufacturing, high tech innovation to the region. And it’s why you see so many great companies having manufacturing here,” Caulfield told CNBC’s Sri Jegarajah.
“What happens now is when other nations realize how important semiconductor manufacturing is to their region, for sovereign security, for supply chain, for economic security, they too [will] want to have semiconductor manufacturing, and that they need to adjust their industrial policies to help create that competitive landscape where manufacturing and those regions are economically competitive,” he added.
The expansion will also implement AI tools to improve productivity such as wafer pattern recognition to auto-classify and spot defects in wafers, said GlobalFoundries.
Smartphone and PC makers are currently grappling with excess inventories of memory chips after stockpiling them during the pandemic-induced boom. As inflation soared, consumers have been cutting back on these goods and prices for memory chips have fallen.
The likes of Taiwanese semiconductor foundry TSMC and South Korea’s Samsung have reported declines in second-quarter profit as weak demand for memory chips continued.
“We’ve seen in the second quarter of this year, inventories at semiconductor companies still climb but at a much muted rate,” said Caulfield. “The good news is we’ve also seen the inventory further down the supply chain, such as system companies, start to go down. And so maybe there is a little bit of a glimmer here that inventory is starting to correct.”
However, global inflation has to be under control first before interest rates can come down and consumer spending can be healthy again, particularly in China, he said.
Major technology trends like artificial intelligence dominate headlines. But some niche plays like the Internet of Things (IoT) offer significant potential despite lower hype, according to tech investor Richard Clode. Clode, fund manager at Janus Henderson Investors, named NXP Semiconductors and Impinj as two IoT stocks he sees as long-term winners. He manages the $3.2 billion Horizon Global Technology Leaders Fund, which is invested in both stocks. One IoT technology he sees hitting its stride is radio frequency identification (RFID) for supply chain tracking. RFID uses small wireless chips to track inventory and assets. It was hailed in the early 2000s as a breakthrough in supply chain visibility. But the technology was too expensive and unreliable back then. NXPI PI 1Y line “The best time to invest in technologies is when they’ve just gone through that revulsion phase of no one ever wants to talk about that technology and because everyone’s been burned,” Clode said, pointing to the lull in news on IoT right now after grabbing headlines five or six years ago. With costs down, performance improved and after years of piloting, Walmart and UPS are rolling out RFID on a massive scale to tag shipments. “Walmart was using RFID in apparel and is now mandated for all of its suppliers in pretty much every category: ‘If you want to supply Walmart, you have to tag every item,’” Clode told CNBC’s “Pro Talks,” highlighting the proliferation of the technology. “We are seeing a lot of these technologies; they are real, they are proliferating, and they are enabling much more efficiency in these supply chains in these retailers,” he added. “I think that’s a great example of how we see the real side of the Internet of Things, or Smarter Cities playing out rather than kind of that umbrella term that’s a bit general and vague, and there’s no specifics behind it.” Clode said NXP and Impinj are the dominant makers of RFID chips today that will benefit from this trend. Their specialty chips that can transmit information wirelessly without batteries or line of sight make them ideal for supply chain applications. U.S.-listed Dutch multinational NXP Semiconductors is the more prominent player best known for automobile microchips, with a $58 billion market cap. Impinj focuses purely on RFID chips and has a smaller $2.4 billion valuation. The analysts’ consensus price target points towards a 45% upside for the next 12 months for the stock.
