Chip Stocks Continue to Rise in Asia, Despite Intel's Sales Warning

Asian semiconductor stocks rose on Friday, despite a dismal outlook from Intel Corp. Investors are betting on a eventual recovery in the sector.

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The Bloomberg Asia Pacific Semiconductors Index rose by 0.6%, extending its recent surge to a five-month high. The main reason for this was South Korean memory maker Samsung Electronics Co., which gained more than 1%.

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Overall, the results are not good for Intel, but they don't necessarily reflect poorly on the overall chip sector, according to Daniel Yoo, head of global asset allocation at Yuanta Securities Korea. The weak forecast is due to sluggish PC demand, which is already well-known, while demand from industries including autos is strong and cloud-computing chip prices are growing.

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Intel has given one of the most grim forecasts ever, slamming shares. This is bad news for the company, which has been struggling to keep up with rivals in the past few years.

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Among Intel's suppliers, package substrate maker Ibiden Co. pared an early 3% drop to less than 1%. Meanwhile, Tokyo Electron Ltd. erased an early gain and fell as Japan and the Netherlands were said to be poised to join the US in limiting China's access to advanced chip-making machines. Asian chip stocks have been on the rise this month as investors anticipate a peak in global interest-rate hikes. Even though they are remaining cautious of a potential recession, Samsung shares have continued to climb. This is despite the company posting its worst profit drop in a decade.

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Mio Kato, an analyst at LightStream Research, said that if a lot of companies expect the middle of the year to be the bottom, some investors may choose weak earnings now as a good entry point. However, he added that he is skeptical over the prospects for a V-shaped recovery.

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Chip stocks in Asia may defy the economic downturn, according to a recent report. The report, titled "Taking Stock," found that chip stocks in Asia have been relatively resilient in the face of global economic headwinds. The report's authors attribute this to the region's strong fundamentals, including a growing middle class and robust domestic demand. They believe that these factors will continue to support chip stocks in Asia, even as the global economy slows.

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Intel's shares fell sharply in after-hours trading following its sales forecast for the current period, which was far below analyst estimates. The chipmaker has been struggling with declining demand from PC customers and intense competition in the server hardware market, though the market has been well aware of these challenges.

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"Although the outlook for 2023 is not ideal, we believe that the market understands the situation," Michael Ciarmoli, an analyst at Truist Securities Inc., wrote in a note. The stock has dropped in the past six months but Ciarmoli believes it will "trade flat to up now that the decks have been cleared for 2023."

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Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest chip foundry, warned earlier this month of weak near-term sales. However, the company forecast slight growth for the full year on an expected recovery in demand for server chips. The Taiwan market is closed Friday.