Reflecting On Processors and Graphics Chips Stocks’ Q3 Earnings: SMART (NASDAQ:SGH)
Quarterly earnings results are a good time to check in on a company’s progress, especially compared to its peers in the same sector. Today we are looking at SMART (NASDAQ:SGH) and the best and worst performers in the processors and graphics chips industry.
The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
The 9 processors and graphics chips stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 1.1% while next quarter’s revenue guidance was 4.4% below.
While some processors and graphics chips stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 2% since the latest earnings results.
Weakest Q3: SMART (NASDAQ:SGH)
Based in the US, SMART Global Holdings (NASDAQ:SGH) is a diversified semiconductor company offering memory, digital, and LED products.
SMART reported revenues of $311.1 million, down 1.7% year on year. This print fell short of analysts’ expectations by 4.3%. Overall, it was a disappointing quarter for the company with a significant miss of analysts’ adjusted operating income and EPS estimates.
SMART Total Revenue
SMART delivered the weakest performance against analyst estimates of the whole group. The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $21.
Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ:NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.
Nvidia reported revenues of $35.08 billion, up 93.6% year on year, outperforming analysts’ expectations by 5.9%. The business had an exceptional quarter with an impressive beat of analysts’ EPS and adjusted operating income estimates.
Nvidia Total Revenue
Nvidia achieved the biggest analyst estimates beat and fastest revenue growth among its peers. However, the results were likely priced into the stock as it’s traded sideways since reporting. Shares currently sit at $146.28.
A global leader in its category, Lattice Semiconductor (NASDAQ:LSCC) is a semiconductor designer specializing in customer-programmable chips that enhance CPU performance for intensive tasks such as machine learning.
Lattice Semiconductor reported revenues of $127.1 million, down 33.9% year on year, in line with analysts’ expectations. It was a slower quarter as it posted revenue guidance for next quarter missing analysts’ expectations significantly and an increase in its inventory levels.
Lattice Semiconductor delivered the slowest revenue growth in the group. Interestingly, the stock is up 9.1% since the results and currently trades at $56.82.
Founded in 1969 by a group of former Fairchild semiconductor executives led by Jerry Sanders, Advanced Micro Devices (NASDAQ:AMD) is one of the leading designers of computer processors and graphics chips used in PCs and data centers.
AMD reported revenues of $6.82 billion, up 17.6% year on year. This print topped analysts’ expectations by 1.6%. Zooming out, it was a mixed quarter as it also recorded a significant improvement in its inventory levels but revenue guidance for next quarter slightly missing analysts’ expectations.
The stock is down 23.2% since reporting and currently trades at $127.65.
Originally the semiconductor division of Hewlett Packard, Broadcom (NASDAQ:AVGO) is a semiconductor conglomerate spanning wireless communications, networking, and data storage as well as infrastructure software focused on mainframes and cybersecurity.
Broadcom reported revenues of $14.05 billion, up 51.2% year on year. This result met analysts’ expectations. Overall, it was a strong quarter as it also logged a significant improvement in its inventory levels and a decent beat of analysts’ EPS estimates.
The stock is up 29.8% since reporting and currently trades at $234.87.
Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market has thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.
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