A Wall Street analyst says tech investors should prepare for a 'potentially severe demand shock' due to the coronavirus crisis
- A veteran Wall Street analyst says tech investors, particularly those in semiconductor stocks, should be prepared for a "potentially severe demand shock" as tech stocks tumbled further on Monday.
- Stacy Rasgon of Bernstein Research drew parallels between the ongoing slump to the financial crisis in 2008-2009.
- "The financial crisis may unfortunately be the best analogue to the current COVID-19 situation, with increasing possibility of a potentially severe, though hopefully, ultimately temporary, demand shock on the way," Rasgon told clients in a note.
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Tech stocks tumbled further on Monday, as a Wall Street analyst warned investors to brace themselves for a "potentially severe demand shock."
Bernstein Research analyst Stacy Rasgon, who covers the semiconductor industry, drew parallels between the current downturn and the 2008 financial crisis, when tech stocks joined a broader market retreat.
"The financial crisis may unfortunately be the best analogue to the current COVID-19 situation, with increasing possibility of a potentially severe, though hopefully, ultimately temporary, demand shock on the way," Rasgon told clients in a note.
Chip companies are considered key indicators of where the tech industry is headed since they must build their products ahead of any upswing in demand for end-customer goods.
Rasgon said the impact on semiconductor stocks "has been moderately severe, but obviously less than 2008." The Philadelphia Semiconductor Index, which tracks investor sentiment in the chip industry, has slipped about 30% in the past month. Rasgon recalled how it cratered 60% from January to November 2008.
So far, the chip companies he covers, which includes tech giants like Intel, Nvidia, AMD and Qualcomm, appear to "be pricing in modest cuts." But an analysis of the trends "does seem to suggest we are not near trough levels of pessimism yet," he added.
Rasgon's insights are based on personal experiences. Referring to one of the stunning events of the Great Recession, the collapse of Bear Stearns, he wrote: "In April '08, a few weeks after Bear Stearns failed, we joined Bernstein, swapping consulting for the glamorous world of Wall Street. Little did we know what we were getting into. And the events of recent days have us thinking back to our beginnings."
The Dow Jones Industrial Average, the Nasdaq Composite Index and the Philadelphia Semiconductor Index were each down about 10% in early trades.
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