5 Semiconductor Giants: Navigating the Recent Pullback

Key Points

• Despite the recent pullback, the semiconductor sector, led by giants like NVDA, AMD, and TSMC, has driven overall market growth.
• While several sector leaders have entered a correction or even bear market territory, it might not be time to panic but rather a time to buy the dip.
• Attention now turns to whether industry leaders like Nvidia can reclaim their upward trajectory and deliver substantial returns.

Amidst the recent correction and pullback across the semiconductor sector, a sector that has long been a powerhouse driving market growth, investors find themselves at a pivotal juncture. After a period of remarkable performance both year-to-date and over the previous year, the sector has encountered a significant pullback. This pullback, however, might unveil a compelling buy opportunity for savvy investors.

The semiconductor industry, spearheaded by giants such as NVDA, AMD, TSMC, INTC, and SMCI, has propelled the overall market to new heights. Led by innovators like Nvidia, the sector had witnessed an unprecedented surge, fueled by burgeoning demand for its products thanks to Artificial Intelligence (AI). However, in recent weeks, the winds of risk have shifted, with capital flowing out of tech and into more defensive sectors and industries like commodities and energy.

Yet, with the recent pullback, could this be the perfect moment to position oneself for future gains in the sector while achieving a favorable risk: reward? Could several industry leaders stand poised to reclaim their upward trajectory and drive substantial returns for those who dare to capitalize on the dip? Let’s look at five semiconductor stocks that might be a great buy on the pullback.

5 Semiconductor Giants  

VanEck Semiconductor ETF

The VanEck Semiconductor ETF NYSE: SMH is arguably the most popular semiconductor ETF, whose top holdings include Nvidia, Broadcom, TSMC, and Intel. Despite pulling back almost 5% from its 52-week high in recent weeks, the sector ETF remains up an impressive 30% year-to-date and nearly 80% over the previous year. The SMH has spent several weeks digesting its uptrend and consolidating between a converging 5-day and 20-day SMA, potentially gearing up for a breakout above $230.

Advanced Micro Devices

Advanced Micro Devices NASDAQ: AMD is a hugely popular semiconductor stock, rated highly amongst analysts. Although the stock is positive double-digits on the year, it has fallen dramatically from its 52-week high, off 25% since making the all-time high in March. Now that the primary support is near $170, it will be essential to see whether the stock can reclaim its 50-day SMA at $180 to confirm a higher low and potential upward momentum.

Nvidia

Nvidia NASDAQ: NVDA needs no introduction. The semiconductor and AI giant stands at the forefront of innovation and growth in its sector and has helped the market achieve new heights in recent months. NVDA briefly entered correction territory yesterday, but after the stock found support near its rising 50-day SMA, it is now down just 6% from its 52-week high. If NVDA can spend some time above $900 and several key converging SMAs, it might not present another dip buying opportunity.

Taiwan Semiconductor Manufacturing Company

Taiwan Semiconductor Manufacturing NYSE: TSM, the world's largest pure-play semiconductor manufacturing company, currently stands around 7% below its 52-week high. Despite this dip, it maintains an upward trend, with short-term support and a potential uptrend break near $140. Analysts rate TSMC as a moderate buy, although the consensus price target closely mirrors current prices. Investors now await whether TSMC can sustain its positive momentum and reclaim higher ground. However, from a technical perspective, the chart does not appear as bullish as the stocks mentioned above.

Super Micro Computer

Super Micro Computer NASDAQ: SMCI has embarked on an extraordinary trajectory, witnessing an astounding climb of almost 800% over the past year and over 200% year-to-date, culminating in its inclusion in the S&P 500 index. Despite these remarkable achievements, the stock is now in bear market territory, down 23% from its 52-week high. 

Investors are left pondering whether this downturn presents an opportune moment to buy the dip or signals an overbought scenario. Buyers retain control with the stock maintaining an attractive uptrend, supported by a relatively low RSI and critical support of around $900. However, analysts offer a cautious outlook despite a moderate buy rating, with the consensus price target suggesting a potential downside of just over 7%.