We recently compiled a list of the 10 Worst Performing NASDAQ Stocks in 2024.In this article, we are going to take a look at where GLOBALFOUNDRIES Inc. (NASDAQ:GFS) stands against the other Worst Performing NASDAQ Stock in 2024.
Factors Driving Market Growth
Markets have been soaring for the better part of the year, with pullbacks acting as entry levels from where investors have joined and pushed the market higher. While artificial intelligence was one of the factors that drove many tech stocks higher, earnings results that were better than expected also had a significant impact.
Similarly, a resilient US economy that has stayed clear of recession amid high interest rates and inflation has also supported the upward momentum. With the NASDAQ and other major indices at all-time highs, investors are becoming increasingly concerned whether the strong upward momentum is sustainable.
Valuations appearing overstretched after one of the longest bull runs are one factor that is sending jitters among the investment community. Similarly, concerns over the negative impact of high interest rates and uncertainty over the US election are slowly curtailing the upward momentum.
Bryn Talkington, managing partner of Requisite Capital Management, believes markets will remain choppy heading into year-end owing to the uncertainty around the US election.
“Until the election is over and we can confirm gridlock, I think at the headline number we’re not going to do much, but I think underneath the surface we’re going to see the haves and have nots,” she said.
Nevertheless, it is the impact of the soaring geopolitical tensions in the Middle East that threatens to affect supply lines that are keeping the markets on edge. The prospects of energy prices surging and fueling inflation on Israel attacking Iran is also taking a significant toll on investor’s sentiments on equities.
While interest rate cuts were expected to be the catalyst to push the equity markets to record highs, that was not the case, as everything seemed to have already been priced. Paul Christopher, head of investment strategy at Wells Fargo Investment, believes the US Federal Reserve is unlikely to cut aggressively as the better-than-expected jobs report in September and renewed worries of a spike in inflation act as a deterrent.
“Just really not ready to cut quite as aggressively as the markets had previously priced. I think if you take November from a half a point down to a quarter point hike, that’s not really a big deal, but it does require some adjustment in markets. There may be some adjustments to rate expectations for December and January as well,” he told CNBC’s “Squawk Box Asia” earlier this month.
While the US economy does not show enough deterioration to justify aggressive cuts, there are stocks listed on the NASDAQ that have underperformed, attributed to a number of factors. Top on the list are companies whose core businesses are negatively impacted by high interest rates that tend to affect consumer purchasing power.
Likewise, some of the worst-performing stocks in the NASDAQ have also taken a hit on high inflation. While inflation has started showing signs of edging lower even as the Fed continues to cut rates, some of the worst-performing stocks are showing signs of bottoming out as macroeconomics improves.
The October BofA Global Fund Manager survey indicates that investors are more optimistic than they have been in four years. 74% of investors think the United States will avoid a recession, demonstrating their optimism about the economy.
Likewise, Michael Hartnett, an investment strategist at BofA, said that investor sentiment is rising due to expectations of further rate cuts by the U.S. Federal Reserve and hopes that Beijing will release more stimulus to strengthen its economy.
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Our Methodology
We utilized a stock screener to find NASDAQ-listed stocks with market caps exceeding $2 billion as of October 16. We then sorted the stocks in descending order based on their year-to-date share price performance. From this dataset, we identified the NASDAQ stocks with the largest YTD share price declines as of October 16. The following stocks are listed in descending order of their share price performance.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
GLOBALFOUNDRIES Inc. (NASDAQ:GFS) is a semiconductor company that provides mainstream wafer fabrication services and technologies. It manufactures various semiconductor devices, including microprocessors and mobile application processors.
The company’s woes in the market stem from failing to capitalize on the artificial intelligence boom. Consequently, the stock is down by about 29.96%, emerging as one of the worst-performing NASDAQ stocks in 2024.
In its second-quarter report, GLOBALFOUNDRIES Inc. (NASDAQ:GFS) did not state how it is positioned to benefit from AI, let alone mention the words AI. As other companies led by Taiwan Semiconductor ramp up chip production to meet the growing demand for AI, GLOBALFOUNDRIES Inc. (NASDAQ:GFS) remains focused on serving the smartphone, automotive and Internet of Things sectors. Consequently, the company’s sales growth has been much lower than those of companies exposed to AI.
The company’s latest quarter saw a 12% year-over-year decline in revenue, indicating that it is finding it difficult to take advantage of the boom occurring in other areas of the chip industry. The significant revenue drop might explain why the stock remains under pressure.
There are cyclical trends in the semiconductor industry, and GLOBALFOUNDRIES Inc. (NASDAQ:GFS) experienced a decline in the first half of 2024. Nevertheless, stronger demand from the automotive sector is already helping revenue recover from its lowest points
Overall GFS ranks 7th on our list of 10 Worst Performing NASDAQ Stocks in 2024. While we acknowledge the potential of GFS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GFS, check out our report about the cheapest AI stock.
