When the Federal Reserve announced a pause in its onslaught of rate hikes, a lot of companies breathed a sigh of relief. Meanwhile, in the chip stock sector, that pause—and that relief—was short-lived. With Fed chairman Jerome Powell plotting another rate hike to come, that’s leaving the chip sector reeling in Wednesday afternoon trading.
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The carnage was widespread, hitting some harder than others. AMD (NASDAQ:AMD) and Intel (NASDAQ:INTC) were down the hardest, losing 4.98% and 4.8%, respectively, at one point in trading. However, other firms also took hits, including Qualcomm (NASDAQ:QCOM) at 2.42% down, AI chip magnate Nvidia (NASDAQ:NVDA), and even Texas Instruments (NASDAQ:TXN) slipped 1.46% at one point. Rate hikes would likely hit the end users of chip sector products and thus hurt their bottom line.
Amazingly, AMD’s loss came right at a time it was planning to invest. AMD announced plans to put an extra $135 million into its Irish presence, though it would do so over the next four years. The $135 million would step up research and development, including adaptive computing and engineering, among others. Meanwhile, Intel’s plans to cement its position as a chip foundry for other chipmakers were proceeding apace as it sold off its 20% stake in IMS Nanofabrication to Bain Capital, a move that brought an extra $4.3 billion to Intel’s coffers. Yet, IMS Nanofabrication, an extreme ultraviolet lithography operation, is a huge step in making semiconductors.
Intel, the second hardest hit in today’s trading, also comes with the worst proposition for investors: a downside risk of 5.94% on an average price target of $31.34. The fact that it’s also the only Hold on the list doesn’t help matters either. However, AMD, the hardest hit of the aforementioned stocks, comes with the best upside potential and a Moderate Buy consensus rating. Its average price target of $134.31 gives it an upside potential of 18.85%.
