The semiconductor industry is in the midst of a historical chip shortage impacting everything from automakers to home appliance manufacturers, and with a number of chip companies set to report their quarterly earnings this week, the ongoing crisis is certain to be top of mind for investors.
But at least one analyst says investors should be thinking more broadly than the shortage when looking at chip stocks. According to Matt Maley, managing director and chief market strategist at Miller Tabak, the performance of semiconductor stocks following their earnings reports could inform how the market will move in the near future.
“It’s been an incredibly important leadership group for the market for many years, but especially in recent years,” Maley told Yahoo Finance Live.
Chip stocks were approaching their February highs earlier this month before pulling back. The thinking, Maley says that if after earnings, the stocks manage to break above prior highs reached in February and earlier this month, the broader market could move higher in general.
“It’s starting to bounce back a little bit this week, and we are getting a bunch of earnings,” Maley said. “If it could continue to rally and break back above that kind of double top from February and April, that’s going to be very bullish.”
On the flip side, if semiconductor stocks fall this week, Maley predicts that could portend a negative reaction from the overall market.
Chip stocks set to report this week include Intel rival AMD (AMD), Qualcomm (QCOM), and Texas Instruments (TXN). Intel (INTC) reported earnings last week, and while it beat analyst estimates on revenue and adjusted earnings per share, news that it missed on revenue in its data center business may have spooked some investors.
Beyond chip stocks, Maley said the fact that 95% of stocks on the market are trading above their 200-day moving average doesn’t necessarily mean investors are bullish. Rather, he says, it’s more likely an indicator of over exuberance.
“The market is really kind of getting ahead of itself on a near-term basis,” said Maley. “Obviously, that doesn’t mean the market will roll over tomorrow; it’s one of many indicators. Too many people point it out as a bullish indicator, but really it’s showing a lot of froth.”
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