Semiconductor Shakeout: Finding Potential Amidst Turmoil

The semiconductor sector, usually a beacon of market strength, found itself in a storm last Friday. Shares of NVIDIA Corp. NASDAQ: NVDA closed the day down 10%, wiping out nearly $200 billion in market capitalization. This dramatic plunge sent shockwaves through the industry, leaving many leading names in deep correction, some even in bear market territory.

The recent selloff across the semiconductor sector saw hundreds of billions wiped out in market capitalization, underscoring the sector's vulnerability to sudden shifts in market sentiment. Amidst the uncertainty, investors face tough decisions: cut their losses, hold firm in anticipation of a rebound, or capitalize on the dip by strategically positioning themselves for potential future gains.

Now, in the thick of a correction and with earnings reports on the horizon, the semiconductor industry is at an important juncture. The sector has been the powerhouse driving the market’s growth for the previous year, thanks to the revolutionary advancements in artificial intelligence (AI). So, let’s look closely at five semiconductor stocks to see if opportunity lies within the recent turmoil.

NVIDIA Corp.

NVIDIA has seen a modest recovery following last week's significant selloff. After closing around $750 last Friday, it is trading near $820. Down nearly 15% from its 52-week high, the stock currently sits below its 20-day and 50-day SMA. With this positioning, further downside potential may loom.

However, should NVIDIA reclaim these short- to mid-term simple moving averages (SMAs), a target of $900 could be considered. All eyes are now on NVIDIA's upcoming earnings report scheduled for May 22. This event serves as a catalyst for the semiconductor sector and holds implications for the broader market.

Arm Holdings 

Arm NASDAQ: ARM, a prominent player in the semiconductor industry, has seen a steep decline of 40% from its 52-week high. Last week, the stock breached key support near $120, triggering a downward spiral. With earnings scheduled for May 8, the company anticipates earnings growth of 158% for the full year. However, investors eagerly await signs of stabilization and consolidation amidst the recent volatility.

Currently trading within a wide 52-week range of $46 to $164, Arm Holdings reflects significant turbulence. As investors brace for the upcoming earnings report, the stock's performance will be closely scrutinized for any indications of a turnaround.

Broadcom Inc.

Broadcom Inc. NASDAQ: AVGO, one of the largest semiconductor companies globally, boasts a market cap of nearly $600 billion. With a Moderate Buy rating based on 22 analyst ratings, it is a top-rated sector stock. Despite the recent volatility, AVGO demonstrates relative strength, down only 10% from its 52-week high.

Notably, the stock recently maintained key support near $1,200 and is now trading near converging moving averages around $1,300. Should AVGO continue to consolidate above these converging SMAs, a potential breakout to the upside may be in store.

Advanced Micro Devices Inc. 

With shares down 32% from its 52-week high, Advanced Micro Devices NASDAQ: AMD is in a bear market. Despite the steady downtrend, the stock remains above a rising 200-day SMA. Stability above the 200-day SMA will be crucial for any potential upward trend reversal. Analysts maintain a bullish outlook, rating the stock a Moderate Buy with a price target of $185.59, suggesting a possible upside of 21.3%.

Taiwan Semiconductor Manufacturing Company

Taiwan Semiconductor Manufacturing Company NYSE: TSM, the world's leading pure-play semiconductor foundry, has experienced a decline of nearly 14% from its 52-week high. Despite being in correction territory, like AVGO, the stock shows signs of consolidation near converging SMAs, with $140 posing as resistance.

Analysts maintain a bullish outlook on TSM, rating it a Moderate Buy with a consensus price target indicating over 15% upside potential. If TSM persists in consolidating and breaches the $140 resistance level, a move toward $150 could be the next target.