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The Zacks Analyst Blog Highlights NVIDIA, Advanced Micro Devices, Micron and Intel

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For Immediate Release

Chicago, IL – June 29, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: NVIDIA Corp. (NVDA - Free Report) , Advanced Micro Devices (AMD - Free Report) , Micron Technology (MU - Free Report) and Intel (INTC - Free Report) .

Here are highlights from Wednesday’s Analyst Blog:

Chip Stocks Decline as U.S. Curbs Sales to China

The United States is planning to impose restrictions on the sale of artificial intelligence chips to China, reports the Wall Street Journal. This might be due to the growing concern over the use of U.S.-made AI chips in Chinese weapon development, hacking and other technological advancements.

The report mentions that such a move is likely to hurt the businesses of big U.S. chipmakers like NVIDIA Corp. and Advanced Micro Devices that are currently at the forefront of a surge in AI development. The U.S. Commerce Department intends to stop shipments of chips made by Nvidia and other chip makers to customers in China and other countries of concern without first obtaining a license.

In August 2022, the U.S government asked NVIDIA and AMD to stop exporting top AI chips to China and Russia. In a filing with the Securities and Exchange Commission, NVIDIA had disclosed that the U.S. government informed it on Aug 26, 2022, about imposing a new licensing requirement, effective immediately, for its A100, A100X and forthcoming H100 integrated circuit sales in China and Russia. The government also banned NVIDIA from exporting DGX or any other systems that incorporate A100 or H100 integrated circuits. During the same month, AMD received new licensing requirements from the U.S. Department of Commerce. These are applicable to its MI250 circuit intended for artificial intelligence. AMD currently carries a Zacks Rank #3 (Hold).

NVIDIA generates a fifth of its revenue from China. It builds graphic chips used for driving the technology behind OpenAI’s ChatGPT and Alphabet’s Bard chatbots. Shares of NVIDIA fell 4.6% in pre-market trading while that of AMD, its rival, dropped 3.7% before the market opened today, after the report in discussion was released.

NVDA is the world’s most valuable chipmaker with more than 80% share of the market for data center accelerator chips. The Zacks Rank #1 (Strong Buy) has been operating under rules requiring approval for shipments to China of its A100 and new H100 parts and partially alleviating the impact on its finances by selling a modified version of the A100 — that is slower at accessing data. However, the Biden’s administration is now planning actions as soon as the next month to expand the restrictions to include those lower-powered semiconductors as well, per a Wall Street Journal report. You can see the complete list of today's Zacks #1 Rank stocks here.

In May 2023, the Cyberspace Administration of China imposed a trade restriction on selling Micron Technology products in key domestic industries on national security concerns. In a statement released on May 21, China’s cybersecurity regulator revealed that the U.S.-based memory chipmaker failed to pass a cybersecurity review, initiated in late March 2023. Such trade restrictions on Micron chips can be seen as a retaliatory action by the Chinese government against the U.S. government’s increasing restrictions on access to critical and more advanced semiconductor technology.

Following the restrictions, Micron disclosed its plan to invest up to 500-billion yen ($3.70 billion) in extreme ultraviolet (EUV) technology over the next few years in Japan in May. The Zacks Rank #3 company will be the first semiconductor company to bring state-of-the-art technology to Japan for production. It expects to ramp up EUV into production on the 1-gamma node in Taiwan and Japan from 2025 onward.

In June, Micron received the Indian government’s cabinet approval to set up a semiconductor testing and packaging facility worth $2.7 billion in the country. The facility is anticipated to generate more than 5,000 jobs. The Indian government agreed to the production-linked incentive worth $1.34 billion for the plant.

Micron’s back-to-back investment plans are in support of the U.S. government’s long-term strategy of reducing dependence on China for the supply of semiconductors and restrict access to critical and more advanced chip technologies. These plans could be seen as MU’s strategy of diversifying its business operations and improving the supply chain of its memory chips, which had been disrupted due to extensive pandemic-led lockdowns in China.

Chip sales in China make up approximately 11% of Micron’s total revenues. The company’s latest moves can also be seen as a balanced approach to sustain its business operations, which have been caught in the crossfire of the ongoing tech war between the world’s two largest economies, the United States and China. Shares of MU dropped by around 1% in the pre-market trading hours.

The latest restrictions on chip sales might hurt another of NVDA’s competitors, Intel, which is still playing a catch-up role in the data center, professional visualization and gaming markets. In first-quarter 2023, INTC reported a 36% drop in its revenues due to poor sales of personal computers and server chips. This was the fifth consecutive quarter of declining sales for the semiconductor giant.

Intel reported around a 33% slash in its first-quarter 2023 revenues from DCAI business unit, which takes into account server chips, memory and field-programmable gate arrays. As it is already facing the brunt of weak demand for its server chips, the latest curb might further jeopardize this Zacks Rank #4 (Sell) company’s prospects in the near term. Shares of INTC dropped around 1.5% in the pre-market trading hours.

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