Infographic: What is Stock Fraud?
What is Stock Fraud?
Every investor out there is looking to get a nice return on their money.
That’s why claims about guaranteed returns or “can’t miss” opportunities can be extremely tempting when they appear. After all, many people have been grinding it out for years in the markets – and rightfully they may feel overdue for their big moment.
But as always, opportunities that are too good to be true must pass the smell test. And most of the time, if you do your homework, they fail with flying colors.
Defining Stock Fraud
Today’s infographic comes to us from StocksToTrade and it highlights stock fraud, which can be described as a violation of security law that occurs when a fraudster compels an investor to buy or sell based on false information.
Importantly, there are many different varieties of stock fraud to recognize, and they all have distinct characteristics that make them unique:
Using “dummy” corporations to create the illusion of representing a corporation with a similar name. Investors are then misled to buy shares in the dummy corporation, rather than the real thing.
High-pressure selling technique used to peddle shares in speculative or fraudulent securities on the phone.
Pump and Dump
False and/or fraudulent information spread to increase the price of a thinly traded stock. When the stock hits a target price, the dumper sells to rake in substantial profits. Those left holding the stock are stuck and must sell at a loss.
When a security is illegally traded based on material, non-public information.
Short and Distort
Similar to a pump and dump, this involves the spread of rumors or false information to profit from short-selling a stock.
A type of pyramid scheme where money from new investors provides the return for old investors.
These are scams where fraudsters claim that funds will be used to buy bank instruments that don’t exist.
Management intentionally manipulates accounting policies or estimates to improve financial statements. It could involve overstating revenues, understating expenses, overstating corporate assets, or understating existing liabilities.
How to Avoid Stock Fraud
How can these potential scams be avoided?
For starters, make sure you take time to do your own independent research on any security you buy. If something seems like it is overly complex, rushed, or if important information seems to be omitted, there is likely a reason for this. In a similar vein, Warren Buffett wisely advocates that a business should be simple and easy to understand, or he won’t invest in it.
Further, it’s worth researching the salesperson touting the investment before making any decisions. Records from securities regulators are often one Google search away – and any disciplinary history should be known before proceeding with any transaction.
Ranked: America’s Largest Semiconductor Companies
This graphic visualizes the market capitalizations of America’s 15 largest semiconductor companies.
Ranking America’s Largest Semiconductor Companies
As our world moves further into an era of widespread digitization, few industries can be considered as important as semiconductors.
These components are found in almost everything we use on a daily basis, and the ability to produce them domestically has become a topic of national security. For example, in 2022 the Biden administration announced the CHIPS and Science Act, which aims to strengthen America’s position in everything from clean energy to artificial intelligence.
With this in mind, we’ve ranked the top 15 U.S. semiconductor companies by their market capitalizations.
Data and Highlights
The data we used to create this infographic is listed in the table below. Year-to-date (YTD) returns were included for additional context. Both metrics are as of May 30, 2023.
|Rank||Company||Ticker||Market Cap (USD billions)||YTD Return|
|13||Marvell Technology Group||MRVL||$54||76.2%|
At the top is Nvidia, which became America’s newest $1 trillion company on Tuesday, May 30th. Shares pulled back slightly over the day and Nvidia closed at $992 billion. Over the past decade, Nvidia has transformed from a gaming-focused graphics card producer to a global leader in AI and data center chips.
In third and sixth place are two of America’s most well known chipmakers, AMD and Intel. These longtime rivals are moving in opposite trajectories, with AMD shares climbing 770% over the past five years, and Intel shares falling 47%. One reason for this is the data center segment, in which AMD appears to be stealing market share from Intel.
Further down the list we see Applied Materials in seventh, and Lam Research in ninth. Both firms specialize in semiconductor manufacturing equipment and thus play an important role in the industry’s supply chain.
Trade War Impacts
As tensions between the U.S. and China escalate, chipmakers are becoming increasingly entangled in geopolitical conflict.
In October 2022, the Biden administration introduced new export controls aimed at blocking China’s access to semiconductors produced with U.S. equipment. This impacted several companies in our top 15 list, including Lam Research and Applied Materials.
Shortly after the export controls were announced, Lam Research said it expected to lose upwards of $2.5 billion in annual revenues.
We lost some very profitable customers in the China region, and that’s going to persist, obviously.
– Doug Bettinger, CFO, Lam Research
In response, China announced in May 2023 that it would no longer allow America’s largest memory chipmaker, Micron, to sell its products to “critical national infrastructure operators”.
This is not the first time Micron has been involved in a controversy with China. In 2018, the firm alleged that Fujian Jinhua Integrated Circuit, a Chinese state-owned company, had solicited a Micron employee to steal specifications for memory chips. The U.S. Department of Commerce imposed export restrictions on Fujian Jinhua as a result.
Chipmakers on both sides of the Pacific will be closely watching as competition between these two countries heats up.
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