Cutting-Edge US Semiconductor Makers Crushed by One Thing after Another in 2022 after Mind-Boggling Bubble in 2020 & 2021

Nvidia -66% from the high, AMD -64%, Intel -63%, Marvell Technologies -57%, Micron -48%.

By Wolf Richter for WOLF STREET:

The US semiconductor giants that make the most advanced chips – and by extension semiconductor equipment makers – have been hounded by a multitude of problems this year, one layered on top of the other, and their stocks have gotten crushed, with Nvidia down 66% from the peak, AMD down 64%, Intel down 63% from its high in April 2021 and 66% from its all-time high in August 2000 (the glories of 22 years of buy-and-hold), Marvell Technologies down 57%, Micron down 48%, Applied Materials down 53%. They’ve issued earnings warnings, starting in the spring – with the most recent batch out last week when AMD, which makes processors for PCs, and Samsung, the world’s largest memory chipmaker, reported results that pointed at an even deeper-than-feared slowdown for advanced chips.

On top of all this, on Friday the White House, with bi-partisan support, announced new restrictions on these companies in their dealings with China. Friday was harsh for those stocks, and today so far is still harsh. For example, Nvidia, the largest US chipmaker by market cap, lost 12% over those two days through early afternoon today.

The mind-boggling bubble in these stocks during 2020 and 2021 is now getting unwound. Nvidia shares [NVDA] are back where they’d first been in August 2020. Between February 2020 and the peak in November 2021, they exploded by 360%. And that – I’ll repeat it because that’s what it is – mind-boggling gain is now getting unwound. The shares have plunged so hard since November that the 12% drop over the past two days is barely visible (data by YCharts):

The new restrictions on these companies in their dealings with China, that the White House announced on Friday, came on top of a slew of other issues that had been boiling over all year.

There was the collapse in demand for cutting-edge processors used in crypto mining rigs. Demand collapsed after crypto prices started plunging in November 2021, which took all the fun out of crypto mining, and crypto miners switched to survival mode and slashed their purchases of crypto mining rigs. Nvidia has warned about this starting earlier this year.

Then there was the down-turn in the PC and laptop business after the blistering boom during the pandemic, when folks switched to working from home and learning at home, and they, their companies, and their schools had to buy all sorts of electronic equipment. When this buying boom ended, chipmakers that make advanced processors and memory chips for laptops and PCs took a hit. This downturn continued in Q3, when shipments of PCs and laptops fell by 15% from the boom a year ago, according to the International Data Corporation today. But note: there were still more PCs and laptops shipped in Q3 than before the pandemic! It’s just that the boom vanished.

Global smartphone shipment started declining on a year-over-year basis in Q4 2021, and have continued to decline year-over-year in Q1 and Q2 2022, and there are bad omens coming out of the industry from all over the place.

There has been a litany of earnings warnings from chipmakers this year for these and a slew of other reasons.

All this comes even as cheap, low-end, tailing-edge semiconductors and microcontrollers used in automotive components continue to be dogged by shortages, and continue to hamper global auto production. In other words, there is a glut in high-end chips, and a shortage in the cheap stuff coming out of aging chip plants that companies weren’t motivated to invest in because there isn’t a lot of money in it.

The Philadelphia Stock Exchange Semiconductor Index [SOX] is down 3.9% at the moment, after falling 6.1% on Friday; and it’s down 44% from its high on January 5.

The restrictions imposed on Friday by the White House on US semiconductor makers, and semiconductor equipment makers, in their dealings with China followed a series of restrictions imposed on them before, but they are by far the most comprehensive yet. They require these US companies to obtain licenses to export cutting-edge semiconductor manufacturing equipment and cutting-edge semiconductors that are typically used in artificial intelligence, supercomputing, and modern weapons systems.

“We believe certain advanced computing capabilities which rely on U.S. chips, software, tooling and technology are fueling the [Chinese] military modernization, including the development of weapons of mass destruction,” which “poses profound national-security risks,” a senior administration official told the Wall Street Journal.

These new restrictions run in parallel with the $50 billion in subsidies that Congress recently passed and that chipmakers will get for setting up chip manufacturing facilities in the US, the purpose being to decouple the entire high-tech supply chain from China, bring semiconductor manufacturing back to the US, and halt the process of the US becoming dependent on China for semiconductors.

Intel [INTC], the second-largest US chipmaker by market cap after Nvidia, never got back to its all-time high of $75 a share 22 years ago in August 2000, and it’s now down 66% from there. From its recent high in April 2021, it’s down 63% (data by YCharts):

Advanced Micro Devices [AMD] is down 64% from its high in November 2021:

Applied Material [AMAT] is down 53% from its high in January this year:

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

  96 comments for “Cutting-Edge US Semiconductor Makers Crushed by One Thing after Another in 2022 after Mind-Boggling Bubble in 2020 & 2021

  1. Sams says:

    USA may decouple the entire high-tech supply chain from China, they also may decopuple from the Chinese markets.

    • Augustus Frost says:

      There will be no decoupling between the two credit markets. That I can guarantee you.

      China probably has the biggest credit mania in the world measured by market excess, but the US still has the lowest aggregate credit standards in its history.

      When (not if) the credit bubble bursts in either country, there will be “blowback” in the rest of the world. I’m anticipating an “unexpected” accident in China first.

      • dang says:

        Augustus, then what. What happens when the whole thing goes caplui ? And what happens, in the mean while, when the villains negotiate a remedy to the bursting of the credit bubble.

        I’m optimistic that they’re about to make mistakes in controlling a world that changes every minute.

        Actually, I’m hoping the next generations who are now completely in charge and so far, seem as trained as I am an old guy with regrets and hope, love.

        • dang says:

          I will pass along a true depression era story. My adopted father and his mother were left destitute when his adopted father died of an appendicitis in 1928. They had a grand house because the man of the family was a master craftsman. When he died, so did the cash flow from his earnings and there was no safety net in place in those days.

          They rented they’re home out and moved to a small place that my grandmother could afford on the meager salary she earned as a janitor in the local school.

          Meanwhile, the renter went broke and lost his utility delivery of water and the pipes in the house froze when the temperature dropped to 45 degrees zero.

        • robert says:

          A better idea, that many people chose, was to rent rooms and/or do room and board. That way they didn’t have to leave their home, did not have to worry about how the home was being treated by the tenants, and they could save the cost of moving to another home.
          Another common practice when buying a home during the lean years; people also used to rent out rooms until the mortgage was paid then enjoy the house by themselves.

      • RH says:

        Decoupling already started, including of the US and China credit markets, even though the US and EU financiers and banksters invested in China are digging their heels in to prevent it. The very limited rise in US interest rates so far (while theirs have to be cut due to their economic and other troubles) means that more investors will see that it does not make sense to invest in China (which has RECKLESSLY created many times as many yuan (partly to make ginormous sums of worthless loans) as the banksters’ “Federal” Reserve has recklessly created US dollars), because their investments will plunge in value as China continues to effectively devalue its currency due to its ongoing, economic catastrophes.

        War may be used by the CCP to retain power by invading a nearby island. A major blowback, either way, will be because without enough neon and various metals for years due to what is going on in Russia and China, the world’s semi-conductor, renewable power generation, and electric vehicle industries may soon suffer more disasters. Apparently, you cannot make advanced chips without neon, and you cannot produce these products without key metals and materials until alternative producers are established. I guess nuclear power and fossil fuels will be here to stay, at least for a decade.

    • Ted says:

      The idea of China and the US decoupling has never been valid and never will be. The 2 largest economies in the world are linked in literally thousands of ways. Moves to restrict high end semi exports or subsidize domestic production make us feel like we are doing something, but beyond making us feel better it’s hard to see what difference it makes in the bigger picture. We will continue to be highly dependent on each other.

      • andy says:

        “We will continue to be highly dependent on each other.”

        So, how is China highly dependent on us exactly?

        • Heron says:

          Commodities, and to sell us stuff so they can keep 1billion+ people busy chasing cheese

        • ru82 says:

          @Heron – exactly. Commodities. They raw materials fir building gadgets and particularly food.

          i.e. The largest pork producer in the US, Smithfield farms, is wholey owned by a Chinese. China is locking up food production across the globe to make sure their people are fed. From my calculations, almost 30% of the US pork production goes to China.

      • RH says:

        China is dependent on us for part of their market to dump subsidized goods. We are slowly moving production of goods out of China, whose labor costs rose dramatically for years despite their oppression of labor.

        Inflation and rising US interest rates (to a limited extent) versus their hidden devaluation and lowering of their interest rates will pull out foreign capital from China slowly. The Frankenstein which they created will keep attacking them and destroying their economy as will its new, worse descendants. Do you want to invest somewhere when your factory may get closed for weeks suddenly and disrupt their supply and transportation chain? China is kaput.

  2. Depth Charge says:

    “The mind-boggling bubble in these stocks during 2020 and 2021 is now getting unwound. Nvidia shares [NVDA] are back where they’d first been in August 2020…with Nvidia down 66% from the peak.”

    And it’s still grotesquely overpriced. That’s why I never compare current pricing to peak pricing, I compare current pricing to historic pricing. NVDA was already bubblicious at $74 before COVID hit. Given the economic realities and what’s in store, it’s probably a $30 stock. The Cathie Woodshed types loading up at $117 are going to get slaughtered.

    • Augustus Frost says:

      Probably not even that ($30).

      $290B market cap with $29B in revenue and this after parabolic growth which absolute will not continue in a major recession.

      Not that it should matter, but the P/E ratio is still a nosebleed 38.

      Dividend yield? A whopping .14%, no longer competitive with current interest rates.

      Balance sheet is decent (strong by current standards).

      If it’s lucky, it will match CSCO’s performance since 2002. This stock is about 50% lower 20 years later, and it took the biggest stock mania in history to accomplish even that.

      The mania will definitely not last another 20 years.

      • WolfGoat says:

        NVidia is a tough one because their GPU market was so dependent on Crypto mining. Now that Etherum has gone Proof-of-Stake, a big part of their market went right out the window.

        They have some Datacenter things they are working on like SmartNIC’s but they will never have the level of demand that mining got them.

        Now Intel is really interesting, they have been beat down by AMD & Nvidia for years and years. They have taken a hit, but when, (not if) it is time to buy into Semi. Intel is a solid play…. hell, comes with a 5.8% dividend!

        • andy says:

          I went around my place couple of days ago and counted 4 out of 5 devices had Intel chip. Couple of laptops bought recently, one ftom work, etc. None with AMD or NVDIA chips. Bought couple of INTC calls next day.

        • Augustus Frost says:

          My prior comments aren’t based upon a fundamental assessment.

          It’s based upon the fact that the current “low” value remains a complete fantasy, even at a 67% “discount” to peak value.

          Current price at 10X revenue is utterly absurd. Peak value was similar to CSCO in 2002. CSCO is a solid company paying a decent dividend now yet still sells for 50% less. That’s what happens when someone pays a mania level price at the peak of a mania.

          As I stated previously, the chances of NVIDIA replicating CSCO’s 2002-2022 performance over the next 20 years are virtually zero.

        • Harry Houndstooth says:

          When trying to catch a falling knife, sometimes it is better to let it hit the ground and vibrate first.

          INTC is on my list to watch as the markets find their bottoms. Just like the tops of the bubble often go beyond logic, so do the bottoms.

    • Flea says:

      Free money really distorts ,the stock market . Only took 7-8 trillion to bail banks out IDIoTS ,History repeats can u spell depression

  3. gametv says:

    The Trump era policy of putting tariffs on China was the wrong approach. It just pushed production of the lowest end stuff to Vietnam and other countries. The policies of decoupling the US and Chinese economy, particularly in technology is the right move.

    But it is an inflationary policy. Off-shoring everything to low wage countries was highly deflationary and along with the price transparency afforded by the internet, was probably the reason the central banks have been able to print money for so long with no inflation, until recently. I guess the other reason was that all that money printing went into asset price increases, not the general economy.

    As grotesque as it is, inflating asset bubbles is probably the best way to pump up the economy, without instigating inflation in core prices. But of course, this probably demonstrates that the Fed should never rely only on core prices as its measure of inflation. If housing prices double, that is inflation, even if the mortgage payments remain constant, due to lower interest rates.

    I cant even fathom who would be buying a home right now. You have to have no idea at all about basic economics to buy a home at the moment.

    • Randy says:

      This is aimed at the general financial blog community…

      Rents up I’m guessing 5 to 10% annually depending on apartment complex in the Pac NW, last 7 years. I live in one and am familiar with a few others.

      In spite of what affluent homeowner types claim, this MOST ASSUREDLY was inflation.

      Contact Portland Tenants United if you don’t think so. They’ll probably give you an earful.

      Oregon to its credit (?) has adopted a limited form of rent control. Something like 7 or 8% plus inflation. Number of Caveats… e.g., only apartments 15 years or older qualify.
      So, yes rent control… very constrained version.

  4. Den says:

    Chips always canary in the coalmine for rest of market. Indices last to tumble.

  5. Joe2 says:

    Dumb investors and Americans will eventually realize that TINA. Knock yourselves out. Go stone age.
    You have no fkin idea of the supply chain and the possible supply chain and supply chain intermediaries involved.

    WTF was this about? Making tech from sand?

    • Jon says:

      Why is making these things in America considered the Stone Age? They used to be made here. I’m sure I’ll get all sorts of MBA or CPA arguments telling me how dumb it is to make products in the US.

      • Ronnie Raygun says:

        I was under the impression environmental rules made it impossible to manufacture here in USA. Very toxic manufacturing process. Shipped to China where no one (American politicians or businesses) cared about harmful effects to the labor force or the environment.

        • dang says:

          The reality is not so obvious it is much more subtle as in the various degrees of corruption that form the spine of all civilizations.

          Without it we would be lost.

        • Brian says:

          US tax policy makes Mfg here not attractive. Foreign built, foreign sold means you are taxed at whatever tax shelter you want to use for foreign sales and you only pay US taxes on US sold. When you try to Mfg in the US, you get taxed at US rates on your foreign sales in addition to your US sales, killing profitability for global companies.

          Remember, taxes are on net profits where labor and other variables only impact gross margin. For a tech company, taxes are typically the largest expense on a supply chain besides for the cost of components and sub-components, more so than labor.

          Depending on the industry, energy costs matter significantly as well. That is part of environmental rules you allude to that also make manufacturing in the US not economically viable, but tax policy is the biggest impact.

          Now when you put in a minimum tax floor for corporations, that means they really want no US mfg. Before you could balance some US mfg with write-offs to minimize taxes, but when you put in a floor, you eliminate that opportunity so everything will be moved out of the US.

          Multi-national corporations have floors full of people whose job is to avoid paying taxes. It’s a huge money maker to arbitrage tax rates and regulations worldwide. They have no loyalty to the US or any other country beyond maximizing profits for shareholders. It’s amazing to me that people think of these MNO’s as American companies when they actually exist by making profits via optimizing relationships with multiple different governments (democratic and authoritarian) world wide. It’s even more eye opening when these MNO’s have such power over US politics even though they attempt to serve many global government masters (enablers).

        • Valerie from Australia says:

          RR: Yes, you are correct. I had a friend who was fairly high up in Intel. One night at dinner about twenty years ago, I was giving him a bit of a hard time about the exploitive practices of the multinationals toward their Chinese employees. He replied, “Valerie, we are not in China to get cheap labor, we are there because we can pollute pretty much without limitation. Cheap labor is just icing on the cake.” A sad commentary on the multinational world, isn’t it?

    • Harrold says:

      Chip and PC companies got a big boost from the pandemic, everybody and his grandmother working from home. But that just pulled future sales forward. Investors acted as if this would go on forever. Group think is always of the lowest quality.

      The industry is probably looking at 2-3 years of slowdown until all that equipment starts to retire. The bubble was easy to predict, and so is this… for anyone who can open their eyes and be impartial to facts.

      • Flea says:

        These things run in cycles,look at japan,Cisco . It’s a long list

      • Augustus Frost says:

        It’s more than that.

        All demand has been inflated by the asset and credit mania. When the mania is confirmed as over, demand will collapse and won’t even come close to recovering for years because much of it is due to uneconomical activity financed by ZIRP and the lowest credit standards in history.

        Even when it does recover which it should many years later, valuations won’t return to anything close to the recent peak because the stock mania will be over. Look at CSCO. It couldn’t recover even with the stock mania getting bigger.

        When the US stock market mania is confirmed as over, it should last a lot longer and will definitely be much deeper than 1966-1982.

        • John says:

          I’m with you. The secular thesis is looking more and more plausible. Japan here we come.

        • economicminor says:

          So to paraphrase you, the Wealth Effect is over?

          The new regime will be Austerity?

          You live off tomorrow’s income, then before you know it, tomorrow is now today.

  6. Depth Charge says:

    Still no “dumb” chips for automobiles. The news is actually getting worse, not better. Manufacturers are still revising down their 2022 production numbers, and Honda just announced a 40% cut in production. The industry is now calling for supply chain issues for another year minimum.

    All of those suckers like myself who were hoping for some sort of rebound in inventory and better prices can pound sand. Mary Barra and GM have gleefully announced that those days are over, they have permanent pricing power, and it’s to the moon with prices from here on out.

    • Lynn says:

      “it’s to the moon with prices from here on out.”

      Probley not. But it might be worth replacing an engine or transmission while waiting for prices to become sane.

      • Cas127 says:

        I wonder what the total cost (parts and labor) is for replacing, say, a Toyota Corolla engine (plain vanilla for plain vanilla).

        A single engine replacement might get you a vehicle that lasts 300k to 400k miles. 30 years of driving.

        I imagine a transmission replacement would be required somewhere along the line as well, but, still…30 years…

  7. Lynn says:

    Whoa.. Just looked at used high end graphics card prices for PCs, way way down. If you can find one that hasn’t been worked to death by miners. Something that went for $4k during the height of the shortage (way overpriced) now for around $450 used. It’s tempting.

    • Harrold says:

      Graphics cards are no longer needed to mine Ethereum. Prices have no where to go but down.

  8. BS (ini) says:

    Ford announced higher price for new orders of their EV truck . 5k
    The Fed with QT will have dramatic effects on the wallstreet pricing. stock buybacks was responsible for 50 percent more or less of the gains since 2008 on the back of the Feds and ZIRP
    Now we have a 1 percent tax on buybacks and much higher borrowing costs and potentially lower profits from QT so not only do we have a slowing economy but more headwinds over time.
    Nothing drops in a straight line but the directional drop is pretty flat when one can’t even see the reflex rally last week of 6-12 percent.
    I love the story in pictures. Feds are responsible. Going forward the new Congress will need to start tightening as well I hope.

    • Lynn says:

      Yeah, & it’s been dropping steadily which doesn’t seem to register with a lot of people because of all the zig zagging. Like boiling frogs. I’s good to see some of the very wealthy get boiled for a change. The bottom half has already been fried.

    • Wolf Richter says:

      Don’t forget M&A. That was also a big factor in driving up share prices. M&A has died. And time someone tries to buy a publicly traded company at a premium, it drives up share prices. Merger Monday is dead.

      Banks are taking massive losses on their leveraged buyout loans that they committed to months ago or even last year. LBOs of publicly traded companies are very difficult to pull off in this environment. Even Musk tried to back out of his Twitter LBO.

      Investment banks have complained about 50% drop in deal revenues.

      • Wolf: Have you written any articles about the Twitter/Musk saga? I do not think I have seen any. If not, I am surprised. I thought you would be all over it.

        • Wolf Richter says:

          It’s just another one of Musk’s jokes that has gone awry. The whole thing is a hoot. Richest man in the world gets away with these kinds of jokes. Remember his weed joke, “funding guaranteed” at $422? As far as I’m concerned, they can both go to heck. I’m not writing about it. Waste of time. But I might write about the losses the banks may have to take on their leveraged loans to fund the LBO that they committed to.

        • robert says:

          The August 2018 ‘funding secured’ tweet of $420/share when TSLA price was about $330 equivalent, is now worth $3300 dollars a share, (even after the almost 50% drop in share price in the last year), with the 5:1 and 3:1 splits, and even as the shares outstanding rose from 200MM to 3B.
          At the time, 2018, I thought is was worth 40 bucks a share.
          Also at the time, Musk was supposed to be worth $20B, or maybe broke, and is purported to be worth ~$200B today depending on what day and who’s counting.
          Funny world, and why I’m still poor.

      • Einhal says:

        I hadn’t heard this. Are they taking losses on LBOs because they committed to them at fixed rates that are now too low given the market, or is it because the collateral against which they committed to lend is now worth less?

        • Wolf Richter says:

          Yes, prices for leveraged loans have plunged (yields have shot up). That’s always a risk banks take when they commit to funding something at certain rates. But this time, yields shot up a lot. They have already taken big losses on other leveraged loans for other LBOs.

        • ru82 says:

          Lots of Leverage loans were bundled into CLOs and sold off to invest? . Very similar to the CDO during the housing bubble. I think a lot of pension funds are holding that stuff.

      • John says:

        Ah … but up here in the Great White North our super-regulated banks are as good as …… gold?

        • robert says:

          Canada has no gold. They flogged it off at the lows. 700+tons, 23 million oz. Also the banks have no reserve ratio, like many nations in the world. Welcome to the new eekonomiks.

    • Auto-outsider says:

      Anyone can raise the prices of their products as much as they want and it is not inflationary. Customers don’t have to pay it. Dealers were already marking up these vehicles, now the manufacturer can capture more of what the customer is willing to pay.

  9. Brant Lee says:

    “Going forward the new Congress will need to start tightening as well I hope.”

    You can count on that, doncha know?

    And, we thought it wouldn’t happen: Ben Bernanke wins the Nobel prize for economics. I would have thought the world reversing its spin in the other direction had more chance, but what do I know?

    • Old school says:

      John Law could do no wrong as well til his monetary scheme blew up and then he had to flee France to keep the broke losers from killing him.

    • dang says:

      Fail upward, don’t you know ? Break shit and ask questions later.

      The opinion that Bernanke’s philosophy was bunk is actually the hypothesis of the current economic experiment being conducted on Wall Street.

    • Sams says:

      No Nobel price in economy. It is a price handed out by Svenska Riksbanken, the Swedish Central bank. In memmory of «Alfred Nobel», but not by or authorised by the Nobel Commitee.

    • robert says:

      From the Nobel site, a challenging ‘Did You Know?” question:
      ‘Did you know that bank runs – where many savers withdraw money at once – can lead to bank collapse?’
      Multiple choice question, answer:
      Even pandering to the lowest common denominator in their audience, the survey registered a 99% ‘Yes’.
      Does that mean there’s hope for the 99%, but not for the prize committee website that even posed the question?

  10. phleep says:

    I have a feeling of a musical chairs game ending. So, consolidations, restructurings, layoffs. Repricing of financial assets. Fire sales?

    • sunny129 says:


      Repricing started in March.
      SPY (-23%) vs SH (+25%) (SDS+49%)
      DIA (-18%) vs DOG (+19%) DXD (39%)
      QQQ (-32%) vs PSQ (37%)
      TQQQ (-77%) vs SQQQ (99%)

      I pair them (favoring Bear) with their long kind (Bull) to cut the loss by whiplash.
      Highly volatile. Definitely NOT recommended for the Novice due to daily decay and other draw backs.
      Front running has become so common, expect MANY strong re-bounces along the way

  11. Implicit says:

    Perhaps the president should be more interested in the production of more natural gas that supplies the electricity for the electric cars, heat and all the chip factories he wants to build here. Since there will be no cheap China labor, how about cheaper energy. and research to support more autonomy.
    Energy is the closest money variant at controlling costs to bring down inflation. Everybody wants that, but they also want the illogical costly appearance of investing in just green energy. The gas and oil bills will hurt the most in the cold areas this winter. Switching to all green is expensive, and not an option for most people, states and countries for a long while.
    We have a lot of energy sources in the US that could be tapped to further strengthen our economy and lower production and fuel costs while the transition to greener sources of energy becomes an option. People should not starve and freeze to death to make some politicians and rich folks look good and green.

    • Wolf Richter says:

      Not sure what you’re complaining about. The US is ALREADY the largest natural gas producer in the world; it produces far more natural gas than it uses, and it exports large amounts of natural gas via LNG to the rest of the world, and to Mexico via pipeline. Natural gas production and exports are a booming business in the US that I have covered here for over a decade.

      here are US LNG exports:

      • Implicit says:

        Ultimately , my complaint is about my nat. gas bill which has sky rocketed, yet the US is the largest producer, and exports 35% of their gas.
        Perhaps there is a confluence of reasons: utility monopolies, less investment, Ukraine and Europe shortage. Regardless, “natural gas is up a staggering 525% since closing at $1.48 in June 2020”.
        My heating bill is a lot higher even after using less.

        • Wolf Richter says:

          Yes, it has skyrocketed since the US is now tied to global natural gas prices via LNG exports that take US production to other countries. But natural gas is now back where it was many years ago, before the surge in US production (fracking) caused the US NG price to collapse starting in 2009. You just forgot what you used to pay :-]

  12. sunny129 says:

    “Nothing drops in a straight line but the directional drop is pretty flat when one can’t even see the reflex rally last week of 6-12 percent”

    Front running crowd dive-in whenever a whiff of pivot in the air, peak inflation here, climb in the unemployment, along with daily ‘siren’ song from the Wall St. So many will be buying into these strong ‘re-bounce’ rallies (Bear traps) down the road. Indexes will remain highly volatile.
    Who wants to invest for the long term in this ‘casino’ type environment?
    Global economy is contracting and the recession already in Europe.

  13. Finster says:

    “In other words, there is a glut in high-end chips, and a shortage in the cheap stuff coming out of aging chip plants that companies weren’t motivated to invest in because there isn’t a lot of money in it.”

    A prime example of what the Austrian school calls “malinvestment”. Yet just a microcosm of the past decade or so. The glitzy, techy, and the sparkly has been over capitalized while the basics have fallen into neglect. A bubble grows in digital bits of nothing and millions of smartphone apps get made, while store shelves go empty, infrastructure crumbles, and affordable housing and medical care grow scarcer. Years of artificially low interest rates have consequences that are just beginning to be appreciated.

    • Not Sure says:

      The direction of American society has a lot to do with this too… We’ve been badmouthing blue-collar work for decades while we put doctors, lawyers, programmers, and stock/finance folks on a pedestal. We’ve been drilling it into kid’s heads that building or growing something with your hands is for dummies and hard work is for suckers while a liberal arts degree is totally worth going into six-figure debt over. Home economics, civics, shop class… Basically any aspect of school that taught kids how to be functional members of society is gone. Malinvestment at its finest!

    • Valerie from Australia says:

      Finster: Yes it IS malinvestment. I see this in the pharmaceutical industry as well. Unfortunately, this is the way the buying public and governments are trained to think. I find it really interesting that those making these bad decisions get rewarded in good times but are not de-incentivised in bad times.

  14. Yancey Ward says:

    I bought my first stock in 27 months today- bought some Intel. Just too cheap not to. And will buy more if it reaches $20/share. Nvidia still has a way to go down, so not touching that one. The equipment makers have farther to fall, too, in my opinion.

    • crazytown says:

      “Too cheap not to” thanks for the good laugh 🤣

    • Augustus Frost says:

      I’m not fully confident the US stock mania is over, but I believe so. I am totally confident the bond market cycle turned in 2020 and at best, the US stock market will confirm it relatively shortly.

      When it is confirmed, “cheap” underperforming stocks like Intel are going to become a lot cheaper.

      Make sure you don’t get caught catching a falling knife.

    • cb says:

      5.4 P/E
      5.79 Dividend Yield

      projected decline in forward revenues and earnings

    • HotTub says:

      I’d be careful buying anything now or in the near future. A bear market rally is very possible, but it’s not for investing in longer term profits. Short term trading? Sure. But adopting a buy-and-hold mentality? Nope.

  15. Pancho says:

    The mismatch between chip supply and demand that Wolf mentioned (the demand is now in low-tech chips while the demand for high-tech chips vanished) is interesting.

    By inflating the monetary supply, the FED creates a market distortion. Entrepreneurs interpret the falling interest rates as an increase in thrift by savers, but it’s not.

    So they misallocate their capital based on misjudging the situation. The recession reveals these misallocations en masse, and losses follow.

    This sounds like what has happened with the semiconductor shortages. It was a foolish decision to invest in high-end chips for crypto mining at the neglect of the low-end production capacity. Now, no one wants the mining rigs anymore, but there is still plenty of demand for the low-end chips.

    If any of the major chip suppliers had kept their eye on that ball and invested their capital in improving output for low-end chips instead of building better mining rigs , then they’d be sitting pretty right now. Like Noah, they’d have had to suffer endless ridicule, but now their foresight would be proven accurate.

    • I think it is best to look at the chip production like the housing construction market. It takes the same general stuff (permits, foundations, framing, siding, rafters, roofing, wiring,plumbing) to build a small house as it does to build a larger house. The margin is better on the larger house, so builders prefer to build larger houses rather than small houses.
      Likewise, it takes the same types of people to make the “clunky large geometry” chips as it does to make the high end (few nanometer geometry) chips. The big money (and profits) has been in the high end market. This is compounded by the semiconductor fab equipment makers who have also been chasing the leading edge money. Who actually supplies equipment or replacement parts for the equipment that makes the old 10 micron feature parts?
      Our military has even worse problems. By the time a complex system gets fielded, some of the parts are already obsolete.
      We’re living in a world where our combat troops have outrun the supply lines – by a lot. Let’s hope they and we survive.

      • TonyT says:

        Actually, “trailing edge” stuff like analog can be very profitable – chip size is very small, are hard to replace (not standardized, and probably never will be), and different chips can use very different processes.

        • Analog is definitely not “trailing edge.” Of course there are some old analog parts and high-voltage analog parts that use large geometry processes. These are different foundries. Nonetheless, you will find that analog is every bit in the leading edge of technology as digital.

  16. dang says:

    The chip makers angst seems to be a return to normal and commercially viable and stable demand. What was your description, something like, ” a mind boggling” trip to nowhere.

    • dang says:

      The general markets are in a state of chaos because the economic paradigm of QE has created an inflation forest fire that needs to be put out. In that sense, the chip stocks are a ringing of the bell : the Top is in !

      • dang says:

        The attack on inflation is two pronged:

        The increase in the FFR (Federal Funds Rate)

        The loud steps on the stair, QT, the systematic and program of reduction of the Fed’s previous largesse, the Fed’s balance sheet.

        What is about to happen will astound history, were I betting man. which by definition is a question that answers itself.

        • dang says:

          First, the price of a share of the S&P 500 will deflate as the gas is exhausted from one of the three QE bubbles.

          The other Fed created bubble that is deflating is housing.

          The third major bubble the Fed QE created was the bond market bubble. Long term bond holders are down more that stock market.

        • dang says:

          Speaking of ” mind boggling” trips, I have a life time of stories that the next generation would roll their eyes at.

          What I think might happen is that mankind, for the first time, moves beyond fossil fuels, essentially the camp fire we have relied on for the past 10000 years or more.

          To me, that is significant.

  17. OutWest says:

    Less chips, less problems. A modern day hustle if I’ve ever seen one…

  18. AD says:

    I look at AMD stock and its near its 2020 price level just before the pandemic.

    Overall it has a financial strength rating on Guru Focus of 9 out of 10 based on various metrics like Z score, debt to equity ratio, etc.

    It has had steady improvement with earnings and revenue over the last 10 years.

  19. david pare says:

    Post pandemic, the next big story in tech for these manufacturers could be chip reshoring. I think part of the chip-reshoring effort is to attempt to mitigate in advance the impact of any “reunification” of Taiwan and China. From what I understand, Taiwan is a chip foundry superpower – this article has some details.

    Currently, if a reunification does happen, those chip company stock prices could go even lower – even though the drop from the pandemic highs has been pretty dramatic. Not to mention the chance of no more high tech hardware manufacturing for a time. A “chip embargo” could be pretty devastating to more than just the chip companies.

    The world seems to be getting more uncertain as time goes on. On the flip side, companies with foundries in the US might do unexpectedly well.

  20. LeClerc says:

    Applied Materials makes tools, not semiconductors. Every fab buys their (always customized) tools.

    Also, the semiconductor tooling industry has always been boom and bust.

    There will be another boom for them.

    • Wolf Richter says:


      What does it say in the very first sentence of the article? “The US semiconductor giants that make the most advanced chips – and by extension semiconductor equipment makers …”

      And further down it says:

      “The restrictions imposed on Friday by the White House on US semiconductor makers, and semiconductor equipment makers, in their dealings with China followed a series of restrictions imposed on them before, but they are by far the most comprehensive yet. They require these US companies to obtain licenses to export cutting-edge semiconductor manufacturing equipment and cutting-edge semiconductors that are typically used in artificial intelligence, supercomputing, and modern weapons systems.

      NO ONE said AMAT makes semiconductors. RTGDFA

  21. Zard says:

    Don’t know. Wonder how long corporate America will “decouple” from America. They are definitely not happy with this chip war that costing them billions. They are already moving their headquarters off-shore b/c of not wanting to pay taxes to support “America”.
    If you have a company with 2/3 of revenues are in Europe and Asia, where would you want to have your company.

    Something is going to give and our political will is just every 4 years.

  22. Moosy says:

    The power of speculation and an exit stampede at display

    Intel did not go up much because they decided to keep their own factories and not like AMD or nvidia rely 100% on their chips manufactured in Taiwan

    Now when it turns out Taiwan is a risk, everyone including intel go down in the exit stampede

  23. Jdog says:

    The wheels are coming off the bus. Derivative bets are going south. Margin calls are forcing sales in bonds at huge losses. US / China trade is now a declared war zone. US consumer savings are near a record low while credit card debt is at all time highs reflecting that consumers are not flush with cash as some would have you believe, they are using their plastic just to survive. They are realizing this is not temporary, seeing prices at their grocery store increase weekly. With mortgage apps cratering, construction is soon to follow with the loss of construction related and support industries as well. Yes, definitely good times.
    But hey, if the Neo-Cons ( in both parties ) get their way, we will soon have a new ramp up in defense industry to support WWIII so we have that going for us…..

  24. MF says:

    This reminds me of the bubble in heavy truck orders in the late teens. Everyone was trying to front run the market by placing orders for more than they needed. Then when production began to catch up, orders collapsed almost overnight.

    I expect auto manufacturers are hard at work trying to lower the chip count in their model lineups. I wouldn’t be surprised to see some de-contented entry level models rolled out for the 24 model year.

    There’s more room at the bottom end of the new market than there has been in a long time.

  25. Giorgio says:

    “Mind-Boggling Bubble” in the Semiconductor? :) I wouldn’t say that… INTEL has a 5.4 p/e and almost 6% Dividend Yield. I saw the crazy bubble in rubbish stocks with huge p/e like Tesla, Nikola, AMC, GME, META….etc.etc.etc

  26. CreditGB says:

    “On top of all this, on Friday the White House, with bi-partisan support, announced new restrictions on these companies in their dealings with China.”

    Government intellectuals in command: “The beatings will continue until morale improves”. Then later they ask, “hey why are you so depressed, why are we in a deep recession?”

    How about making it simpler and cheaper to make their own high tech chips in USA? Tax cuts, regulations cut, investment incentives, not more beatings by these simpleton bureaucrats.

    How’d we ever get into this situation.

    • Wolf Richter says:

      “investment incentives,”

      Chip makers got $50 billion from the US Gov to set up manufacturing plants in the US. Did you miss that part in the article? That’s the dual strategy.

      From the article:

      “These new restrictions run in parallel with the $50 billion in subsidies that Congress recently passed and that chipmakers will get for setting up chip manufacturing facilities in the US, the purpose being to decouple the entire high-tech supply chain from China, bring semiconductor manufacturing back to the US, and halt the process of the US becoming dependent on China for semiconductors.”

Comments are closed.