It’s been a difficult year so far for the once-booming semiconductor sector. In a sign of just how bearish the market has turned on the sector, the ProShares UltraShort Semiconductors ETF , an inverse exchange-traded fund that bets against the sector, has returned nearly 29% this year, while the PHLX Semiconductor Sector Index is down 27.4% in the same period. While Meeks is not avoiding the sector altogether, there is one chip stock he’s staying clear of — despite a significant drop in its share price. “The way I look at Nvidia, the stock wouldn’t be down 5% to 10% tomorrow. I think unfortunately it can go lower. I would not be a buyer even on the dip,” Meeks, portfolio manager at Independent Solutions Wealth Management, told CNBC ” Street Signs Asia ” on Thursday. Nvidia’s business has been “deteriorating rapidly,” he added, pointing to the company’s “pretty nasty” second-quarter earnings report. He added the results were particularly disappointing given that Nvidia had already lowered its quarterly revenue and earnings forecast just a couple of months ago. On Wednesday, Nvidia reported second-quarter earnings that missed Wall Street expectations for revenue and earnings per share (EPS). The chipmaker posted adjusted EPS of $0.51, which fell short of Refinitiv’s consensus estimate of $1.26. Revenue came in at $6.7 billion, below the consensus estimate of $8.1 billion. Read more These global stocks could do well in a recession and look cheap, say Morgan Stanley and UBS Goldman Sachs thinks this FAANG stock is a sell — and gives it downside of more than 20% Energy stocks are on a roll. But this one has the balance sheet to beat them all, says Citi Meeks said he’s staying on the sidelines until the company’s numbers stabilize. “Show me a quarter in which they beat the analyst expectations. It seems that every time they report or communicate to us, they are lowering numbers yet again, you cannot buy a stock, even if it becomes relatively inexpensive when numbers are still going down,” he added. Nvidia has lost more than 40% of its market capitalization this year. The pandemic darling saw a surge in revenue last year as demand for its graphics cards and server chips rose as gaming and work from home arrangements took hold. The chipmaker had also benefited from the use of its graphic cards by cryptocurrency miners. “Their problem is about a third of their sales come from gaming. And what you could read there is crypto because quite often these chips are used for crypto mining and of course that asset class has absolutely been crushed,” Meeks said. His “confidence buys” in the semiconductor industry are Synopsys and Cadence Design Systems . The firms specialize in electronic design automation, which refers to software that allows semiconductor engineers to design and test complex chips.
