In addition to Nvidia, the latest export restrictions on AI and HPC chips would deal a huge blow to the broader sector, including AMD which has only recently made a name for itself in supercomputing. This is consistent with licensing requirements levied on Nvidia last month for exports of next-generation AI-enabling hardware to China – including its best-selling Ampere architecture-based A100 server GPUs and the newest Hopper architecture-based H100 server GPUs shipping later this year. Restricted chip technologies: Chips used for AI and HPC – two of the fastest growing applications – are restricted from being exported to China.Aimed at curbing China’s growing influence over the supply chains of key semiconductor end-markets, and limiting the rival economy’s military advancements, the latest export restrictions are primarily levied on innovative chips for AI and high-performance computing (“HPC”), as well as related manufacturing equipment: government’s notice to chipmakers of interest – including Nvidia and AMD – last month over its intentions to curb exports of advanced semiconductor technologies to China, Washington has laid out details over said restrictions last Friday. Drops the Axe on China in the Semiconductor Arms Raceįollowing the U.S. While we remain optimistic on both chipmakers’ long-term upsides, we believe AMD makes a better buy for now on the basis that its exposure to the recently imposed export restrictions, as well as its valuation premium to peers, are relatively lower compared to Nvidia’s. ![]() government’s ban of chip technology exports to China, and its potential implications on both AMD and Nvidia’s near-term fundamental and valuation prospects. The following analysis will provide a detailed discussion over the context of the U.S. Market response to their respective earnings results and peers’ commentary on the industry’s forward outlook given the added complexity of recent export restrictions to China could weigh on the stocks’ performance further over the coming weeks and months, potentially creating compelling entry opportunities. And accordingly, both are expected to emerge better than most that have been impacted by the near-term demand slowdown and recent regulatory changes.īut with the semiconductor sector’s valuations still higher than historical lows last observed in 2018, and a current macro backdrop that remains weak with mounting uncertainties spanning recession risks, entrenched inflation, and monetary policy tightening that have yet to resolve, we expect further volatility in both AMD and Nvidia shares. government’s latest decision to ban the export of certain chip technologies to China, with both companies having already suffered a marked slowdown to their respective fundamental performances in recent quarters, snapping earlier runs of upbeat reports.ĭespite cyclical and geopolitical headwinds in the near term, both chipmakers remain the backbone of critical next-generation technologies, and industry leaders within their respective expertise – namely, PC CPUs and server processors for AMD, and GPUs and AI for Nvidia. AMD ( NASDAQ: AMD ) and Nvidia ( NASDAQ: NVDA ) became the two most high-profile American fabless chipmakers being entangled in the U.S. In addition to unravelling demand within the semiconductor sector that rapidly turned a multi-year boom into a rapid bust this year, recent regulatory changes driven by intensifying geopolitical tensions have only compounded pains. And a recent tally of global PC shipments in the third quarter, which showed a rapid decline in demand from -6.8% y/y in 1Q22 and -15% y/y in 2Q22 to now -19.5% y/y in 3Q22, was enough to send the Philadelphia Semiconductor Index on its way “to the lowest since October 2020” during Tuesday’s session (October 11), underscoring the dour outlook ahead. The combination of softening PC demand in the post-pandemic era and weakening consumer spending amid rising recession risks have already led to a flurry of performance warnings from chipmakers in recent weeks. ![]() The semiconductor sector continues to be the worst performing cohort in equities this year.
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