As the Q2 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the processors and graphics chips industry, including Lattice Semiconductor (NASDAQ:LSCC) and its peers.
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 Q2. As a group, revenues beat analysts’ consensus estimates by 0.9% while next quarter’s revenue guidance was 12.9% below.
After much suspense, the Federal Reserve cut its policy rate by 50bps (half a percent) in September 2024. This marks the central bank’s first easing of monetary policy since 2020 and the end of its most pointed inflation-busting campaign since the 1980s. Inflation had begun to run hot in 2021 post-COVID due to a confluence of factors such as supply chain disruptions, labor shortages, and stimulus spending. While CPI (inflation) readings have been supportive lately, employment measures have prompted some concern. Going forward, the markets will debate whether this rate cut (and more potential ones in 2024 and 2025) is perfect timing to support the economy or a bit too late for a macro that has already cooled too much.
Amidst this news, processors and graphics chips stocks have had a rough stretch. On average, share prices are down 5.9% since the latest earnings results.
Weakest Q2: Lattice Semiconductor (NASDAQ:LSCC)
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 $124.1 million, down 34.7% year on year. This print fell short of analysts’ expectations by 4.7%. Overall, it was a disappointing quarter for the company with underwhelming revenue guidance for the next quarter and a decline in its operating margin.
Esam Elashmawi, Interim Chief Executive Officer & Chief Strategy and Marketing Officer, said, "Second quarter 2024 results reflect the impact of cyclic industry headwinds. While the industry continues to go through a period of inventory normalization, we are starting to see signs of improvement. We continue to execute on our ongoing product portfolio expansion and remain well positioned for long-term growth."
Lattice Semiconductor delivered the weakest performance against analyst estimates of the whole group. Unsurprisingly, the stock is down 4.8% since reporting and currently trades at $52.30.
Is now the time to buy Lattice Semiconductor? Access our full analysis of the earnings results here, it’s free.
Best Q2: Nvidia (NASDAQ:NVDA)
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 $30.04 billion, up 122% year on year, outperforming analysts’ expectations by 4.5%. The business had an exceptional quarter with a significant improvement in its inventory levels and an impressive beat of analysts’ EPS estimates.
Nvidia pulled off the biggest analyst estimates beat and fastest revenue growth among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 6.9% since reporting. It currently trades at $116.99.
Is now the time to buy Nvidia? Access our full analysis of the earnings results here, it’s free.
Intel (NASDAQ:INTC)
Inventor of the x86 processor that powered decades of technological innovation in PCs, data centers, and numerous other markets, Intel (NASDAQ: INTC) is the leading manufacturer of computer processors and graphics chips.
Intel reported revenues of $12.83 billion, flat year on year, falling short of analysts’ expectations by 1.1%. It was a softer quarter as it posted underwhelming revenue guidance for the next quarter and a decline in its operating margin.
As expected, the stock is down 22.1% since the results and currently trades at $22.67.
Read our full analysis of Intel’s results here.
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 $300.6 million, down 12.7% year on year. This result met analysts’ expectations. Zooming out, it was a mixed quarter as it also logged a significant improvement in its gross margin but underwhelming revenue guidance for the next quarter.
The stock is down 16.7% since reporting and currently trades at $19.35.
Read our full, actionable report on SMART here, it’s free.
Qualcomm (NASDAQ:QCOM)
Having been at the forefront of developing the standards for cellular connectivity for over four decades, Qualcomm (NASDAQ:QCOM) is a leading innovator and a fabless manufacturer of wireless technology chips used in smartphones, autos and internet of things appliances.
Qualcomm reported revenues of $9.39 billion, up 11.1% year on year. This number surpassed analysts’ expectations by 1.9%. It was a strong quarter as it also put up a decent beat of analysts’ EPS estimates and strong sales guidance for the next quarter.
The stock is down 7.3% since reporting and currently trades at $167.54.
Read our full, actionable report on Qualcomm here, it’s free.
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