The VanEck Semiconductor ETF down nearly 35% year-to-date, though enticing, does not warrant investing in the chip stocks, says Jared Weisfeld.
Semiconductor stocks are not recession-friendly
The tech sector specialist at Jefferies warns the fear of recession weighs on the possibility of a near-term recovery in semiconductor stocks. This morning on CNBC’s “Squawk Box”, he said:
More cyclically sensitive areas within tech [are] completely breaking down. Semis, for instance, relative to SPX are sitting on fresh lows as there’s broader concerns about a recession. So, we’re advocating to move away from semis.
Earlier this month, the U.S. Federal Reserve resorted to its biggest rate hike since 1994 that materially increased the chances of a recession. As per the revised number on Wednesday, real GDP fell at an annualised pace of 1.60% in the first quarter of 2022.
PCs could be a headwind for semiconductors this year
Weisfeld’s dovish stance on the semiconductor stocks is also attributed to “PCs” – a market he says will be a headwind for the chipmakers as it slows down significantly in 2022. He noted:
We were shipping 260 million PCs globally pre-COVID that ballooned to 340 million post-COVID. That market will decline about 10% this year. So, from a semiconductor standpoint, it becomes a little bit difficult to outperform.
Better opportunities to play the tech space here, the Jefferies expert added, is in Cybersecurity. Names that particularly pop out to him include CrowdStrike Holdings Inc and Splunk Inc.
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