Chip stocks fell to two-year low as more tech and China’s AI ban add to woes

The chip sector slumped on Friday for its third 6% daily drop of the year after US regulators moved to curb China’s military ambitions as it issued broader restrictions on semiconductor technology and artificial intelligence that can be sold to the second largest in the world. economy.

On Friday, the US Department of Commerce expanded its list of chip technology that require a license to be sold to China, essentially a euphemism for a ban if the license can be denied, and the PHLX SOX Semiconductor Index,
which had been down about 3% before the news broke, fell to close the session down 6.1% at 2,356.75, a closing level investors last saw rising in early November 2020.

News of the ban was recently posted on the back of Advanced Micro Devices Inc. AMD,
issuing a $1 billion shortfall warning in expected sales to PC customers on Thursday night. That followed last week’s earnings forecast from MU, from memory chip maker Micron Technology Inc.
which was about $1 billion below Street’s expectations, leading analysts to question whether 2022’s sudden chip glut is worse than 2019’s. AMD shares led chip stocks down down 13.9% to close at $58.44, with Micron shares falling a modest 2.9% to $52.91.

Read: ‘This is worse than 2019’: Micron faces ‘unprecedented’ supply problems and analysts are divided on whether it has bottomed out

Friday’s drop is just the worst one-day drop in the SOX index since September 13, when it fell nearly 6.2%. In fact, Friday’s drop is simply the third-worst single-day performance of the year for the SOX index, with June 16’s drop of just over 6.2% ranked the worst, according to FactSet data.

See also  The Forward Stance: Shifting into Action on Tech

The Commerce Department’s broader list follows one from September that focused on AI technology from Nvidia Corp. NVDA,
Nvidia shares fell 8% to close at $120.76 on Friday.

Nvidia shares tumbled last month when the graphics processing unit maker revealed the list of products it needed a license to sell in China, mainly the company’s A100 and H100 data center AI technology, and estimated a potential impact of $400 million in the expected third quarter. income if licenses were denied. The ban has just added to Nvidia’s bleeding year, as it has lowered its outlook not just once, not just twice, but three times. Still the largest US chipmaker by market capitalization, Nvidia ended Friday capped at $304.2 billion.

Read: Nvidia’s ‘China Syndrome’: Are Stocks Melting?

Bans on chip technology in China are nothing new: Just over two years ago, a ban targeted the machines needed to turn silicon wafers into finished chips, equipment made by companies like Lam Research Corp. LRCX,
and KLA Corp. KLAC,
and in 2018 it was about Micron and memory chips. Lam’s shares fell 5.7% on Friday, while KLA’s fell 4.1%.

In the rest of the sector, the shares of Intel Corp. INTC,
fell 5.4% on Friday, while shares of Qualcomm Inc. QCOM,
decreased 3.5% and Broadcom Inc. AVGO,
shares fell 4%. Texas Instruments Inc. TXN Stock,
which happens to be the largest US supplier of auto chips, fell 4.4%.

Read: AMD shows the end of the PC boom may be hurting chipmakers more than expected

See also  How technology is changing the medical profession

As for the third-party factories that produce the silicon wafers that become microchips, Taiwan Semiconductor Manufacturing Co. TSM shares,
shares fell 6.2% and GlobalFoundries Inc. GFS,
shares fell 5.2%. Shares of Marvell Technology Inc. MRVL,
which in August disappointed with its data center forecast, also took a beating of 11.7% to close at $42.35.

Over the course of 2022, the SOX Index is down 40% for the year, with AMD and Nvidia stock freefalling nearly 60%, while the S&P 500 SPX Index,
has lost 24%, and the tech-heavy Nasdaq Composite COMP
It’s down 32%.

Leave a Comment