You would think that this might be a good time for chip stocks like GlobalFoundries (NASDAQ:GFS). And you’d have good reason, too. With signs that the chip shortage is abating and artificial intelligence (AI) is making new gains, prompting demand for new chips, it would seem like good times are ahead. However, that’s not what GlobalFoundries found, and shares were down modestly in Tuesday afternoon’s trading. GlobalFoundries ran into two major speed bumps with its projections for the first quarter of 2024.
First, several of its main customers are clearing their shelves, which means there’s less demand for the conventional chips that GlobalFoundries offers. Meanwhile, other customers are looking for more advanced chips—likely in support of the new applications coming out—and GlobalFoundries doesn’t offer the necessary processes to make those chips. So, between demand slumping for basic chips and demand rising for chips GlobalFoundries doesn’t offer, that’s a double-edged problem for GlobalFoundries.
Is GFS a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on GFS stock based on two Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 23.3% loss in its share price over the past year, the average GFS price target of $64 per share implies 16.41% upside potential.
