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:
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