Microcircuit market crash? Chip makers fear worst recession in a decade
Microcircuit market crash? Shares of semiconductor makers fell after chipmaker Micron Technology Inc warned of an impending slowdown in demand for its products, raising fears that the entire industry is headed for a painful downturn; Bloomberg writes.
The U.S. Semiconductor Manufacturers’ Index in Philadelphia fell 4.6 percent, and all 30 of its participants were in losses, the biggest drop in the index over the past two months. The situation in Asia was not the best: shares of many companies, from Taiwan Semiconductor Manufacturing to Samsung Electronics, SK Hynix Inc. and Tokyo Electron Ltd. fell there as well.
Investors are increasingly concerned that the industry’s infamous cyclicality could lead to a prolonged downturn after years of widespread shortages that led it to prosperity.
Citigroup Inc. analyst Christopher Danely did a microcircuit market analysis and was unequivocal on the matter:
“We remain confident that we are entering the worst period of decline in semiconductor manufacturing in at least a decade, perhaps since 2001, given the recessionary expectations and the inventory build-up.”
And while the PC market was already in a slump a month ago, there is now a widespread weakening in demand, as Nvidia, Intel and Advanced Micro Devices have issued warnings.
The adjustments in estimates extend not only to sectors dealing directly with consumer demand. but also to other parts of the market, including data centers, manufacturing, and automotive production.
Before the pandemic, the average lead time for chip orders was usually less than 15 weeks; now it’s 27 weeks, causing a lot of companies, such as Toyota Motor Corp and Apple, to lose billions of dollars in sales because they couldn’t get enough chips in time.
But there are also beneficiaries in the market, such as TSMC, which reported 50% revenue growth in July. The Taiwanese company made capital investments, while the U.S. and European governments, China and Japan, used subsidies to boost domestic production capacity.
According to Yasuo Imanaki, chief analyst at Rakuten:
“The surge in demand for smartphones and PCs amid remote work is now clearly waning. And we should be wary of the risks that the adjustment will not be as small as Micron and other companies had hoped just a couple of months ago.”
Recall that Musk previously sold Tesla stock for $6.9 billion.
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Investors gravitate toward bear market after Fed decision
The consensus among investors is that the U.S. Federal Reserve will raise rates again before the end of the year and will not loosen its monetary policy until 2024, which is a bearish outlook for the stock market. So it’s important to be prepared for a drop in the S&P 500 and other indices.
That’s the prevailing view of about 350 respondents to the Instant MLIV Pulse survey after Wednesday’s Federal Open Market Committee meeting.
The findings contrast with the interest rate swap market, which is still struggling to gauge a rate cut this year. More than 70% of MLIV Pulse respondents said the Fed is not done raising rates yet. More than half said they expect the central bank to wait with its policy easing until next year.
The survey results are in line with Fed officials, but go against traders who estimated this year’s rate cut has led to lower Treasury yields.
Swap markets expect the Fed rate to peak at around 4.95% in May and then fall to about 4.2% in December.
Earlier we reported that the U.S. Department of Justice has begun investigating the collapse of Silicon Valley Bank.
Startups under threat worldwide after Silicon Valley Bank collapse
High-tech startups have been hit. Companies around the world are facing a fight for survival after the collapse of a major US investment bank, Silicon Valley Bank (SVB). There was a “huge disruption” in the industry globally, Bloomberg reported, citing market participants. The entire stock market, and the S&P 500 in particular, plummeted.
Startups under threat
The bankruptcy of the lending institution, in particular, affected the co-founder of startup Birdly Inc. Quang Hoang. The entrepreneur invested about $10 million in SVB and is still unable to repay the money four days after the bank was shut down by the California Department of Financial Protection and Innovation. However, the entrepreneur is far from the only one who has faced similar problems, the article specifies.
“Hoang was one of thousands of founders around the world this week trying to track down their money after days of chaos and who are completely rethinking the way they run their own businesses. Startups from Silicon Valley to London to Tel Aviv to tech hubs across Africa have depended on SVB as a one-stop store for everything from storing their fortunes to personal mortgages,” the story says.
Now investors and technology companies are predicting a complicated financial future for themselves, even if the bankrupt bank begins to attract deposits from customers under a new name. Many market participants faced a “financial payback” for their overreliance on the credit institution’s risky investment assets, the memo said.
On March 11, the California Department of Financial Protection and Innovation closed Silicon Valley Bank, a large investment bank based in Santa Clara County. All insured deposits from SVB were transferred to Deposit Insurance National Bank of Santa Clara. Depositors were expected to have access to their accounts by March 13.
Earlier we reported that the U.S. Department of Justice has begun an investigation into the circumstances of the collapse of Silicon Valley Bank.
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