Escalation in The Chip Wars: A Blow to Semiconductor Stocks
Trade wars possess an inherent destructive force, a phenomenon exacerbated in the current escalation of chip wars following the Biden administration’s ban on equipment from Huawei and ZTE due to national security concerns.
China’s retaliatory response is evident in its prohibition of American chipmakers’ products for domestic telecommunications companies, forcing a shift to local suppliers. This tit-for-tat dynamic poses a significant threat to U.S. semiconductor stocks with substantial revenue reliance on Chinese markets.
One such example is Nvidia (NVDA), unsure of the ban’s impact on revenue stemming from a market that represents 20% of its data center segment sales, the fastest-growing segment of its business.
The Vulnerable Stocks: Advanced Micro Devices (AMD)
Advanced Micro Devices (AMD) is particularly exposed to China’s restrictions, with over $3.4 billion in sales to China accounting for 15% of its total revenue. This dependency, though declining, remains a crucial element of AMD’s market share.
Beijing’s additional measures, like product security evaluations, further deepen the troubles for AMD in China, signaling a sustained period of challenges for the chipmaker in this market.
The Struggling Giant: Intel (INTC)
Intel faces a more challenging scenario, having generated 27% of its revenue from China in the last year. The escalating restrictions will significantly impact its sales as China represents its largest market, even surpassing the U.S. in terms of revenue generated.
The limitations on Intel’s “Intel Inside” computers in China will add to the company’s woes, with implications on its share in the server CPU market highlighted by TrendForce data.
The Resilient Player: Arm Holdings (ARM)
Despite export controls, British chipmaker Arm Holdings manages to navigate the turbulent waters through its joint venture, Arm China. With a quarter of its revenue originating from China, Arm Holdings demonstrates the ability to adapt to evolving market dynamics.
Arm’s compliance with regulations showcases its commitment to sustainable growth, as evidenced by a 7.9% rise in sales to China in its recent fiscal quarter, underscoring its position as a semiconductor stock with growth potential.
Investors are compelled to reassess their portfolios in light of China’s chip crackdown, evaluating the resilience and adaptability of semiconductor stocks in navigating this challenging landscape.
