Chip Shortage 🚗

Chip Shortage

When the Coronavirus pandemic began almost a full year ago, many things changed in the stock market, in companies, and within the supply chain behind all of them. There are no better examples to look towards to analyze shifts in the market than within the market for semiconductors.

Semiconductors or chips are commonly used pieces of hardware integral to the operation of electronics such as videogame consoles, cars, and other consumer electronics. When the pandemic struck, the semiconductor industry had a bit of a redistribution of supply, as a reaction to the automakers shutting down their factories. At the same time, with an increase in the number of people quarantining, the video game industry saw a huge boost in demand and thus a greater need for semiconductors. But with the economy slowly reopening over the past few months and continuing to do so, automakers are faced with a shortage of chips for their cars. In fact, Volkswagen, GM, and other automakers have had to stop or slow down production at many of their plants due to a shortage of semiconductors.

Some have adapted their strategies, for example G.M. announced that they would seek “to keep producing our most in-demand products — including full-size trucks and SUVs and Corvettes” — during the shortage.

This prioritization may be a strategic way to keep losses limited. Despite falling over the past month, GM has had a strong rebound and seems to be continuing its 6-month trend in the green. Do you think this news will play a bigger role in car stocks or will companies manage to adapt before chip supply runs too low?

I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

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