The growth peaked in early 2018 and then again in 2021 September. Sales growth (the orange bars) went through almost a perfect sine wave, with about a 3.5 to 4 years cycle. You can see the cyclical dynamics pretty clearly in the chart. And quickly the shortage turns into a glut, taking chip companies such as NVDA and MU and also Wall Street by surprise in the same way the toilet paper hoarding surprised Kimberly-Clark ( KMB) and Clorox ( CLX). Due to the chip shortage earlier in the year, companies started to hoard chips "just in case" they need them and cannot get them (just like people hoarding toilet paper when COVID first broke out). The report calls the current stage the toilet paper hoarding moment for the chip business, for good ideas. In contrast, the overall tech sector (represented by the QQQ fund) suffered a relatively milder correction of 28% loss.Ĭhart 2, taken from this Reuters report, shows the cyclicality of the sector more vividly. NVDA suffered a total loss of more than 48% YTD and MU more than 36% (which requires a 92% and 56% rally to break even, respectively). Chart 1 shows the YTD price decline of the sector's two leading stocks, NVIDIA ( NASDAQ: NVDA ) and Micron ( NASDAQ: MU ). You can see that either from the stock prices (chart 1 below) or the sales (chart 2 below).
And by this time, it is kind of public information that the last chip cycle has already passed its peak. The chip business is notoriously cyclical, more so than the overall economy at least.
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