By Monish Chhabra ǀ May 29, 2024

We look at three chip stocks, and all of them paint a similar story.

First is the global favourite right now – NVIDIA. This American company is the largest supplier of semiconductor chips used in high-performance computing, neural networks and cryptocurrency mining. 

Its stock price behaviour over the years 2000 to 2002, is strikingly similar to the recent one over 2021 to 2024. Two intermediate peaks in the distribution, followed by a third final higher peak.

Second is the Dutch giant – ASML Holding – which is the largest supplier to the semiconductor industry. This company makes machines that are needed for chip production. 

The price action following the blow-off top in the year 2000,  seems similar to that lately - two hits to the higher orange line, followed by a reversion to mean line in dotted-blue, and then a final hit to the lower orange line. 

Third is the Taiwanese company – TSMC – which is the world’s largest semiconductor foundry that manufactures semiconductor chips on order from other companies. 

Looking past the blow-off peak of the year 2000, the stock hit the top orange line a few times, reverted to the mean dotted line, and made one final attempt at the top line, during the period Sep 2000 to Mar 2002 – that seems similar to the period now from Mar 2021 to May 2024.

Hereon, for market operators like us - it would be an exercise combining the muscle memory of the past, with the deftness of the present.

Either such stocks would show follow-up action similar to 2002, and we play accordingly.

Or, they would chart an entirely new path, and we learn accordingly.