Nvidia, Marvell, SanDisk, SK Hynix, and other semiconductor stocks declined between 2% and 8% in morning trade Thursday, with the SOXL ETF falling over 10% and the SOXX ETF dropping more than 3%. Ben Reitzes, Melius's Head of Technology Research, attributed the decline to investors rotating to safety amid tensions over the war in Iran during a CNBC interview. Reitzes explained that higher oil prices from potential Strait of Hormuz supply disruptions could fuel inflation, pressure central banks to raise rates, and increase semiconductor input costs, though he characterized the rotation as temporary. Geopolitical risk has increasingly influenced tech sector performance as conflicts impact commodity markets and supply chain stability.
Reitzes Links Iran War Tensions to Semiconductor Input Cost Concerns
Reitzes said that if crude oil prices rise due to supply disruption from the Strait of Hormuz standoff between the U.S. and Iran, it could pressure central banks to raise interest rates to contain inflation, thereby causing input costs to increase. He noted concerns about helium and LNG impacting electricity costs which can affect the supply chain. Reitzes cautioned that it is too early to gauge how the Iran war could affect input costs across the semiconductor industry. His comments come amid strikes by the U.S. and Iran following the termination of the ceasefire between the two countries last week.
Reitzes downplayed concerns that AI and chip stocks are overvalued, stating that the AI trade remains on track. "Just a few weeks ago, we were on that path, and I don't think anything's really changed," he said. The tech-heavy Nasdaq Composite index was down nearly 1% at the time of writing. The Invesco QQQ Trust is up 27% over the past 12 months, while the iShares U.S. Technology ETF is up 38%.
Hyperscaler Capex Plans Remain Focus Ahead of Big Tech Earnings
Reitzes said he is looking forward to upcoming capital expenditure plans from Big Tech companies and hyperscalers for clues about where chip stocks could head next. Alphabet, Intel, Microsoft, Meta Platforms, Apple, Amazon, and other tech giants are scheduled to report their latest quarterly results over the next two weeks. "I think when you see the fundamentals come out for hyperscalers, you'll see capex increases, not decreases," Reitzes said. He added that he does not believe any hyperscaler would want to give up on AI, and as a result, he does not foresee any company in this segment trimming its capex plans.
FAQ
What caused chip stocks to decline on Thursday?
Chip stocks including Nvidia, Marvell, SanDisk, and SK Hynix declined between 2% and 8% in morning trade Thursday. Ben Reitzes attributed the decline to investors rotating to safety amid tensions over the war in Iran, with concerns that oil price increases from Strait of Hormuz supply disruptions could fuel inflation and raise semiconductor input costs.
How could the Iran war affect semiconductor input costs?
Reitzes explained that if crude oil prices rise due to supply disruption from the Strait of Hormuz standoff, it could pressure central banks to raise interest rates to contain inflation, thereby increasing input costs. He also noted concerns about helium and LNG impacting electricity costs which can affect the semiconductor supply chain, though he cautioned it is too early to gauge the full impact.
What are analysts expecting from upcoming Big Tech earnings reports?
Reitzes said he is looking forward to capital expenditure plans from Big Tech companies and hyperscalers scheduled to report over the next two weeks, including Alphabet, Intel, Microsoft, Meta Platforms, Apple, and Amazon. He stated he expects to see capex increases rather than decreases, adding that he does not believe any hyperscaler would give up on AI or trim capex plans.
