Nvidia‘s (NASDAQ: NVDA) Global Technology Conference 2024 (GTC 2024) kicked off on Monday, stuffed with “sizzle and substance” (stated Bank of America), but in addition providing “no large surprises” (in keeping with Morgan Stanley). Investors who had been hoping for extra are promoting off Nvidia inventory modestly immediately — down 2.2% by 11 a.m. ET — on Tuesday morning. And they don’t seem to be the one ones promoting.
Taiwan Semiconductor Manufacturing (NYSE: TSM) inventory can be down 2.2% immediately, and Intel‘s (NASDAQ: INTC) off 2.6%. Micron (NASDAQ: MU), which has been bundling its excessive bandwidth reminiscence chips together with the factitious intelligence (AI) chips that Nvidia is promoting, is struggling a 1.5% sell-off, as nicely.
There could also be two causes for this.
Everything AI begins with Nvidia
Nvidia has changed into the usual bearer and business chief in AI chips, so let’s begin there.
As TheFly.com studies, Nvidia provided up a “slew of product and associate bulletins” final night time and laid out plans for increasing AI’s function in providers, robotics, and the omniverse (the artist previously generally known as the metaverse). What Nvidia did not do, nonetheless — and what buyers apparently have been hoping it would do — is update its evaluation of the scale of the whole addressable market (TAM) for AI chips. That means no new enhance within the potential gross sales of Nvidia chips worldwide — but in addition no enhance within the TAM for Taiwan Semiconductor, Intel, or Micron, both (not less than in keeping with Nvidia).
This might be the primary purpose semiconductor shares are having a foul Tuesday morning. But the second purpose could also be associated.
What’s the matter with Arizona?
In the instances of Intel and Taiwan Semiconductor, there is a second purpose for buyers to be involved. As Nikkei Asia studies immediately, 5 suppliers to Intel and TSMC have delayed building of their very own services in Arizona, which have been supposed to assist the development of recent semiconductor vegetation there from Intel and TSMC.
Suppliers LCY Chemical, Solvay, Chang Chun Group, KPPC Advanced Chemicals, and Topco Scientific are blaming the excessive cost of building, labor, and discovering employees to build their vegetation for the postponements — in addition to Intel and TSMC themselves slow-rolling growth of their very own Arizona vegetation. TSMC, for instance, has postponed the beginning of mass manufacturing at its Arizona plant from 2024 to 2025.
How dangerous is that this information for Intel, Taiwan Semiconductor Company, and Micron? Taken along with Nvidia’s lack of elevating its estimate of AI TAM, it sounds a bit regarding for Intel and TSMC. And not less than one of many suppliers — LCY Chemical — can be a provider to Micron and its excessive bandwidth reminiscence chips.
Still, I would not fear too a lot about immediately’s semiconductor sell-off. For one factor, a $1 trillion TAM for AI chips remains to be fairly darn massive. And as large as Nvidia is, it nonetheless bought lower than $61 billion in all types of chips final 12 months.
Plus, in keeping with Nikkei, it is sooner to build chemical provide vegetation for chipmakers than for the semiconductor manufacturing vegetation they service. If demand for AI chips grows as anticipated, and Intel and TSMC get again on schedule building their Arizona vegetation, the suppliers might nonetheless in all probability end their very own vegetation in time to provide them earlier than operations start.
While immediately’s information bears watching in case issues worsen, I do not see it posing an enormous danger to semiconductor shares over the long run.
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Bank of America is an promoting associate of The Ascent, a Motley Fool firm. Rich Smith has no position in any of the shares talked about. The Motley Fool has positions in and recommends Bank of America, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the next choices: lengthy January 2023 $57.50 calls on Intel, lengthy January 2025 $45 calls on Intel, and brief May 2024 $47 calls on Intel. The Motley Fool has a disclosure coverage.
Why Intel, Taiwan Semiconductor, and Micron Stocks All Dropped Today was initially printed by The Motley Fool
