For a while there, it wasn’t looking good for chip stocks. A perfect storm of awful brewed for the sector as corporate spending pulled back and consumers did likewise. However, Nvidia (NASDAQ:NVDA) and AMD (NASDAQ:AMD) are leading the way on a comeback trail for chip makers throughout the spectrum.
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Reports suggest that it’s not just chip makers making that comeback, but rather, a complete tech sector rally. This is because one of the biggest problems for markets in the last few weeks—a Federal Reserve that’s turned hawkish—is starting to retract. New expectations suggest that the Federal Reserve’s ongoing plan of hiking interest rates may be about to slow down, and that’s good news for the tech markets. Often fueled by speculation, tech stocks need ready access to capital. A Fed backing off the interest rate hike button will make some more cash available.
In addition, Louis Navellier notes that even if the federal funds rate increases by 75 basis points, that still won’t throw much of a crimp in earnings. A rally in tech stocks seems like it may yet work, as markets around the world reported gains as well. The Shanghai Composite saw gains for the sixth day in a row, while the Hang Seng index also popped up.
Analyst consensus, meanwhile, is very much in favor of both AMD and Nvidia’s likelihood of success. Both stocks are considered Strong Buys by analyst consensus despite both losing quite a bit of ground over the last 12 months. However, AMD stock offers a 24.74% upside potential thanks to its average price target of $84.70. Nvidia shares, meanwhile, offer a 29.33% upside potential with an average price target of $203.88.
