Amidst recent market fluctuations, semiconductor stocks are seeing a significant turnaround. Leading companies such as Taiwan Semiconductor Manufacturing Company (TSMC), Intel, and Advanced Micro Devices (AMD) are experiencing a surge in stock prices following a rocky start to the year. While the initial decline was attributed to December’s Santa Claus rally, the turnaround can be largely credited to the actions of President Joe Biden.
The Biden administration has unveiled plans to restrict China’s access to advanced chips that support artificial intelligence functions, causing a ripple effect in the semiconductor market. Nvidia, the dominant player in the AI chip sector, has been hit the hardest by export restrictions. However, a recent report by The Wall Street Journal indicates that the administration is now shifting its focus to older-generation computer chips used in various industries like consumer electronics, military weapons, and cars.
China currently holds a significant market share in this segment of the semiconductor industry, prompting President Biden to address the issue as part of his agenda. Alongside concerns about potential trade wars, Congress has advocated for protecting the supply chain by supporting domestic semiconductor production and imposing tariffs on chips imported from China.
While these efforts are still in their early stages, the Commerce Department has already awarded subsidies to Microchip Technology for expanding the production of microcontrollers. Additionally, the department is expected to compile a list of other American companies that may receive government support to counter China’s growing industry in lower-end chips.
However, it is important to note that, despite the positive news and rising stock prices for Intel, TSMC, and AMD, there is no guarantee that these companies will directly benefit from the subsidies. Other semiconductor companies like Marvell, Texas Instruments, and Microchip are also performing well in response to the industry trends.
If one were to place a bet on a high-profile chipmaker benefiting from the new push to subsidize domestic chip production, Taiwan Semiconductor appears to be the safest bet. With a lower forward earnings multiple compared to Intel and AMD, TSMC is trading at an attractive valuation. Furthermore, it is trading at a cheaper price than competitors such as Marvell, Texas Instruments, and Microchip.
As the semiconductor industry braces for potential trade wars and policy changes, Taiwan Semiconductor may emerge as the frontrunner in the ongoing battle for dominance in the chip market.
The source of the article is from the blog tvbzorg.com