Key points
- Chip index's longest losing streak since 2008
- How far the chip index fell from June's record
- South Korea's finance minister sees chip demand holding
The PHLX Semiconductor Index fell for an eighth straight session on Friday, its longest losing streak since October 2008. The index dropped 3.8% to 11,137.29 and lost 11.4% for the week.
On Saturday, South Korea's finance minister, Lee Hyoung-il, said he expects the chip boom to continue. "For now, our view is that we can sustain this growth at least through next year," Lee told CNBC at the IMF-World Bank annual meetings in Bangkok.
The chip index is nearly 24% below its June record
The index, which tracks 30 large US-listed chip stocks, fell 15.7% over the eight sessions from Oct. 7 to Oct. 16. It closed 23.9% below its record close of 14,634.72 on June 22. It's still up 57.2% this year.
Before this week, the index's most recent eight-session losing streak ran from Oct. 1 to Oct. 10, 2008. The previous eight-session decline ran from Dec. 27, 2007, to Jan. 8, 2008. Its longest losing streaks in Yahoo Finance data, which begins in 1994, lasted nine sessions, in July 1996 and May 2006.
The iShares Semiconductor ETF (SOXX), which tracks a different chip index, fell for a ninth straight session on Friday, closing at $493.39. That matched its May 2006 losing streak, the longest since the fund began trading in 2001.
Memory stocks led the declines early in the week after China's CXMT announced plans to launch server memory using a smaller cell design by year-end. Wednesday's hotter-than-expected inflation report added to the pressure.
On Friday, Bank of America analyst Vivek Arya offered a valuation argument for the battered chipmakers. Based on his forward-earnings estimates, Nvidia (NVDA), Broadcom (AVGO), and Micron Technology (MU) trade at multiples comparable to Cisco's after the dot-com crash.
Korea's finance minister points to a supply gap
"That's because the gap between demand and supply for semiconductors is still very wide, and supply is still being expanded," Lee said, explaining his outlook.
Lee said the stock market's sharp swings this year reflect the chip industry's larger share of South Korea's economy compared with other countries. Samsung Electronics and SK Hynix led the Kospi to a 7.57% drop and a trading halt on Oct. 15. Lee said South Korea's economy is still solid and that the country expects to collect more taxes this year than it first projected.
On Thursday, a Maeil Business Newspaper column urged South Korea's government to prepare for a slowdown in the AI boom. It cited two experts who expect new chip supply to intensify competition in the memory market by 2029.
