The Week Ahead in Semiconductor Stocks: Russia-Ukraine hangs over NVDA, AMD, AMAT

US semiconductor stocks all dropped in unison on Friday, February 11, after the US government told them to seek new sources of raw materials outside of Russia and Ukraine. A number of rare gases and metals, such as neon and palladium, used in semiconductor manufacturing are heavily imported from these two nations that appear on the brink of war. Nvidia (NVDA) dropped 7.3%, Applied Materials (AMAT) lost 5.2% and Advanced Micro Devices plunged an unexpected 10%.

Nvidia Stock News and Forecast: NVDA earnings on Wednesday

Nvidia, the hottest semiconductor stock of the past two years, has not failed Wall Street's consensus forecasts since the beginning of 2019. Now three years later, the chipmaker famous for its GPUs, hopes to make the streak last to 12 quarters on Wednesday post-market. That is when Nvidia reports results for the quarter ending in January – technically, it is the fiscal fourth quarter of 2022.

Consensus estimates put non-GAAP earnings per share (EPS) at $1.22 on revenue of $7.43 billion. This would amount to a YoY EPS gain of 56% and revenue growth of 49% YoY. This unusual growth rate for a company of Nvidia's size is why the market currently values it at 61 times trailing EPS. In the past 90 days only one analyst revised EPS projections lower for the quarter, while 31 revised their forecasts higher.

The Ukraine situation has dimmed the lights for many semiconductor stocks, including NVDA, in the wake of Russia's troop buildup this month on Ukraine's border. The US government warned on Friday that Russia's invasion of the country may be imminent. Market research firm Techcet estimates that 90% or more of semiconductor-grade neon comes from Ukraine, while 35% of US palladium comes from Russia. The market is correctly pricing in the possibility that the supply chain for materials used in chip manufacturing could face an unprecedented constraint if a war breaks out and Russia responds by halting exports of these precious inputs.

Though the 9-day only just surpassed the 21-day moving average, it seems Friday ended that indicator's optimism. NVDA is likely to find support between $212 and $220. There is no change in sentiment until NVDA closes back above $260.

NVDA 1-day chart

Applied Materials Stock News: AMAT earnings coming Wednesday

Supply constraints caused by a Russian invasion of Ukraine would specifically affect manufacturing equipment makers like Applied Materials. Neon sourced as a byproduct of Russian steelmaking is then refined in Ukraine before being used in the lasers that semiconductor foundries use to produce chips. A slowdown in the supply chain could be difficult for Applied Materials since its management is expecting a high growth rate in capex in 2022 across the industry.

Wall Street is expecting $1.86 in adjusted EPS on revenue of $6.16 billion for the quarter being reported on Wednesday after the market closes. There may be worries on the part of the market ahead of reporting since the company missed on top and bottom lines in the most recent quarter. The company missed adjusted EPS by $0.02 and revenue forecasts by $211 million. In the upcoming quarterly report, AMAT experienced 19 EPS downward revisions in the past 90 days.

Support can be found in the demand zone between $124 and $129 for the time being.

AMAT 1-day chart

Advanced Micro Devices Stock News: A worrisome Friday for AMD

Last Friday saw AMD shares plunge 10%. As with the prior two companies, the market is worried about supply chain disruptions caused by a Ukraine-Russia war. The good thing for long-term investors is that AMD already reported earnings on February 1, and they were quite spectacular. The chip designer reported adjusted EPS that topped estimates by $0.16 and revenue by $309 million. AMD is the poster child for realizing that semiconductor stocks in this news environment are being treated as members of an industry rather than as individuals with differing capabilities and long-term prospects.

It seems AMD is destined to drop back to $100 again where it last found its footing. Bulls are unlikely to rejoin the fracas until AMD shares make it back above $120.

AMD 1-day chart