Chip shares led the declines in the Tel Aviv Stock Exchange today. This is the reason

Nova and Kamtec are manufacturers of systems for testing the manufacturing processes of chips, and Tower is a chip manufacturer. Today’s sharp declines come after nice increases in the shares, so for example the Tower share increased in the last year by 142%, Camtech increased by 82%, and Nova by 56%.

Sergey Vaschunok, a senior analyst at Oppenheimer Israel, explains that the declines in stocks come against the backdrop of skyrocketing oil prices and the sharp declines in Asian stock markets. “The stock markets of Korea and Japan, after a rally of tens and hundreds of percent – are materializing. The reason for this is justified, because both countries are very dependent on oil, which comes mainly from the Gulf.”

According to him, “this oil is the fuel for the magnificent electronics industries in these countries. If we anticipate a shortage of energy sources in Asian countries, it will obviously have a negative effect on the chip industry.”

According to Vaschunok, there is currently a negative sentiment in the local chip stocks, “after the stocks made rare moves. For investors, it’s taking money off the table in a state of uncertainty, and that seems completely understandable to me.”

“The problem will not continue to burden forever”

However, Vaschunok estimates that the chip industry will not be harmed. “The Japanese, Koreans and Taiwanese are efficient, and they will find a way. They will get oil from another source, maybe Australia or the US, and pay a little more. This problem will not continue to burden forever, but today investors are more aware of the risks,” he says.

One of the risks is an economic slowdown and even a recession, and according to him, “When oil is over $100, historically it has shown a way to a recession or a serious slowdown. In such cases, the entire risk assessment changes dramatically.”

In an overview of the chip market conducted by analyst Blaine Curtis of the investment bank Jefferies, he wrote that spending on AI infrastructure remains particularly immune, and large companies “lock in” multi-year supply agreements.

At the Cantor Investment Bank, analyst C.J. Muse wrote last week that “we continue to see the chip shares as must-owns”.