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Semiconductor companies’ basket

Market Opportunities - 16/09/2021

16 September, 2021

The example below uses Contracts For Difference (CFDs). Calculations are only on the price of the specific instrument on the date below and calculations indicate a possible opportunity for profit or loss. No representation or warranty is given as to the accuracy or completeness of this information, consequently any person acting on it does so entirely at their own risk.

Semiconductor companies’ basket weekly uptrend opportunity based On 1.00 Lot Calculation:

Global semiconductor shortage

  • Global semiconductor shortage heavily impacted the markets as semiconductors are an important part of global tech production. With intense increase in automatisation in all industries demand for semiconductors will continue to rise in the short term but also in the long term as well;
  • In the US semiconductors are necessary to produce 12% of the national GDP. (Source: Goldman Sachs). In 2020, global semiconductor sales rose 6.6% to US$440 billion even as global GDP shrank 3.5%. (Source: Deloitte);

Shortage reasons:

  • Temporary disruption of shipments and production due to the covid pandemic;
  • Increase in demand due to the growth of new technologies: cloud services, 5G networks, AI services…The global semiconductor market is expected to grow 25.1% to $551 billion in 2021;
  • Ongoing tech war between US and China;

The tech war intensified under President Donald Trump and is continuing under President Joe Biden. The U.S. has already levied sanctions against several big Chinese companies, including SMIC and Huawei, amid national security concerns. Huawei began stockpiling semiconductors ahead of the sanctions coming into effect and other companies followed their lead further straining supplies.

Governments interventions

  • In May, South Korea announced an enormous $451 billion investment planning to become a semiconductor giant;
  • The US senate voted through $52 billion in subsidies for chip plants in June;
  • The EU is seeking to double its share of global chip manufacturing capacity to 20% of the market by 2030;

Short to mid-term shortage will continue

Fresh cash probably won't resolve the current chip shortage as money would go toward new manufacturing facilities. New factories cannot open quickly, particularly those that make semiconductors, due to the process that involves pressing chemicals into silicon. For a new facility it takes 2.5 years to be built. Most expansions that are starting now will not increase the available capacity until 2023.

HISTORICAL PERFORMANCE

Company

Ticker

Current price

Below the record high

This year Increase

Average weekly volatility this year

AMD

#AMD

$105.6

16.88%

14.79%

8.10%

NVIDIA

#NVDA

$223.41

4.02%

69.73%

8.19%

APPLIED MATERIALS

#APPLIEDMAT

$141.23

4.7%

60.64%

8.29%

Source: Yahoo finance

  • The three companies are components of Nasdaq100 index;
  • AMD, NVidia and Applied Materials reported better than expected earnings results in last quarter;

STOCK PRICE REACTION: BASED ON STATISTICAL ANALYSIS

Downside potential

Upside Potential

-4.43%

+6.20%

Potential Profit/Loss on 1 lot of every stock in the basket2

-$16,773

$23,434

-€14,213

€19,857

-£12,137

£16,956

-C$21,206

C$29,627

Data Source on Stock Returns and Volatility: Bloomberg

TARGET LEVELS: SUPPORT AND RESISTANCE

Company

Support

Current Price

Resistance

AMD

100.92

105.6

112.14

NVIDIA

213.50

223.41

237.25

APPLIED MATERIALS

134.97

141.23

149.98

Note: Support and Resistance Levels have been calculated by using upside and downside potential figures.

Please note that past performance does not guarantee future performance.

1-Calculation Downside/Upside Potential: Average price reaction for all five stocks from 5 trading sessions prior to the earnings date release for the last 8 quarterly earnings releases.

2-Profit/Loss Calculation (**): Based on 1 lot (*) on each of the three stocks (3 lots). Range: based on the statistical analysis.

* 1.00 lot is equivalent to 1000 units
** Calculations for exchange rate used as of 09:20 (GMT+1) 16/9/2021.
Fortrade recommends the use of Stop-Loss and Take-Profit, please speak to your Client Manager regarding their use.
*** You may wish to consider closing your position in profit, even if it is lower than suggested one
**** Trailing stop technique can protect the profit – Ask your Client Manager for more detail

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