The semiconductor industry, especially Nvidia, benefited from an enormous hype around KI & Co. in the past few years. According to a study, however, the sector now has an enormous probability of crashes.
• High reviews and enormous price developments at Nvidia & Co.
• S&P 1500 Semiconductors & Semiconductor Equipments Industry Group Index exceeds the overall market massively
• Risk of bladder in the semiconductor industry?
The semiconductor industry has experienced a rapid climb in recent years. The industry has benefited enormously, especially by increasing the demand for chips for electric vehicles, artificial intelligence, 5G technologies and cloud computing.
In addition, geopolitical factors, such as trade conflicts and the increased state funding of chip production in countries such as the USA, China and the EU, have further accelerated dynamics in the industry. Large companies such as TSMC, Nvidia, Intel and Samsung invest billions in new factories and technologies in order to meet the growing demand.
Bladder on the market?
In the end, however, there was increasing speech of a bladder in the semiconductor industry. For example, the high ratings of some companies speak for this. Many semiconductor shares have risen sharply – Nvidia, for example, has multiplied within a short time, which is probably also due to the high expectations of artificial intelligence and their potential. Against this background, governments and companies invest billions in new chip plans. However, if the demand does not remain as strong, this could result in an oversupply over time. In addition, expectations of companies from the sector are enormous, AI and Digitization drive them up. However, it is quite possible that not all of these growth forecasts are met.
In addition, there are also some arguments that clearly speak against bladder formation, such as structural demand. Because AI, cloud solutions, 5G and electric cars need more and more chips in the long term. At the same time, high-end chips, especially for AI, are scarce because the production capacities are limited. Investments and government funding are also likely to support the industry in the long term.
High crash probability
Nevertheless, there is an increased risk of a strong downturn in some shares, Mark Hulbert recently said in a contribution to Marketwatch. In his assessment, he referred to a study entitled “Bubbles for Fama”, which was carried out by Robin Greenwood and Andrei Shleifer from Harvard University and Yang You from the University of Hong Kong. The base represents an algorithm to predict bubbles that threaten to burst, which basically says: the higher a little, the more likely a crash. Crash describes a decline of at least 40 percent over a period of two years. If an industry has exceeded the stock market by at least 100 percentage points in the past two years, the probability of crashes is 53 percent, explains Hulbert, explaining the results of the researchers. The crash probability also increases to 76 percent if the industry has exceeded the market by 125 percentage points in the past two years, and 80 percent if the value is 150 percentage points, according to Marketwatch.
According to Hulbert, the criteria are currently on an S&P 500 industry: the S&P 1500 Semiconductors & Semiconductor Equipment Industry Group Index (in German: semiconductor & semiconductor equipment). According to the fact set, the two -year (unannped) return of the index is 165.5 percent, which lies 117.7 percentage points above the comparable return of the S&P 500, noted. This high number indicates a crash probability of more than 70 percent.
Nvidia share & Co. before possible downturn
Due to the index weighting according to market capitalization, the largest companies are particularly at risk. The five largest stocks that together make up 89 percent of the index are: Nvidia, Broadcom, Qualcomm, Advanced Micro Devices (AMD) and Texas Instruments.
The AI giant Nvidia alone accounts for around 60 percent of the S&P 1500 Semiconductors & Semiconductor Equipment Industry Group Index. The share has lost more than 15 percent of value at the Nasdaq this year after it had gone up by around 143 percent in 2024.
In general, according to the study, there is no significantly increased crash probability on the US market. Some companies could be overrated and the crash probability of the semiconductor industry is enormous, but the sector itself has strong fundamental growth factors. If there is a correction, it could also be a market cleanup as a complete bubble. Investors, especially those with engagements in the semiconductor sector, should still be careful. The past has shown that overheated sectors are often most affected by corrections.
Editor finance.net
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