YMTC Ban Likely A Plus For Micron & Western Digital, While A Minus For AMD & NVIDIA, Analyst Says

Mizuho analyst Vijay Rakesh saw the potential for a Yangtze Memory Technologies Co ban and expanding restrictions from AI or GPUs to include compute/memory, happening in short order.
Based on checks from his Washington team, the analyst believes expanded restrictions could happen soon.
He assumed a ban on YMTC could be a near-term positive for memory and Micron Technology, Inc MU (Neutral; Price Target $52) or Western Digital Corp WDC (Neutral; Price Target $40), but he believes YMTC already has the equipment to ramp wafers through 2023E.
While he believes MU is positioned well with new roadmap ramps, near-term headwinds remain into 2023E with softening demand for PC and handsets and a deteriorating pricing environment for DRAM and NAND as the industry remains modestly oversupplied.
WDC has executed well overall, but he sees NAND trending even softer into 2H22 and 2023E as demand paused for PCs and handsets with inventory correction.
He also sees emerging entrants into the NAND landscape, such as YMTC, bringing on capacity in 2023E and beyond, with NAND oversupply likely to continue, impacting pricing and margins.
There could be expanded restrictions from AI or GPUs to include compute, CPU, and data center, an increased negative to Advanced Micro Devices, Inc AMD (Buy; Price Target $125) or NVIDIA Corp NVDA (Buy; Price Target $205).
The restrictions on >128L NAND and <18nm DRAM memory equipment sales and the possible addition of YMTC to the entity list could be harmful to WFE, with 2023E WFE downside to as low as <$80 billion.
He believes AMD is well positioned and has a significant opportunity to gain server share targets and upcoming game console launches.
While NVDA's valuations were steep, he believes improving PCs, AI deep learning and inferencing markets, gaming trends, automotive, and data center position it for upside to estimates.
NVDA is also well positioned for the growing machine learning, deep learning, and AI markets driving 10-11x performance versus CPUs, in his view.
His NVDA price target reflects its >90% market share in critical high-margin Data Center AI.
Price Action: MU shares traded higher by 0.91% at $54.45 on the last check Wednesday.

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