Tom Lee, head of research at Fundstrat, has advised investors to consider buying semiconductor stocks after a significant drop in U.S. tech shares, which followed a steep decline in Asian markets. The iShares SOXX semiconductor ETF fell approximately 8%, while the Invesco QQQ Trust ETF lost around 3%.
Lee noted that this is the 18th instance since 2011 where semiconductor stocks have dropped by 6% or more in a single day, and historically, these dips have led to recoveries 88% of the time within a month. Early trading on Wednesday showed some recovery, with semiconductor companies like Broadcom and Intel experiencing modest gains.
The semiconductor sector has seen substantial growth, with the SOXX ETF rising 84% since late March and the Roundhill Memory ETF increasing by about 150% since its launch in early April. This growth is attributed to heightened demand for computing power driven by advancements in artificial intelligence, which has allowed the memory sector to maintain strong pricing power.
However, this pricing power has also raised concerns for tech companies reliant on these components, as indicated by Apple CEO Tim Cook, who warned of rising memory costs impacting their business in the upcoming quarters