AMD, TSMC, Broadcom And Other Chip Stocks Hit By Biden's Fresh AI Chip Export Restrictions: Details

The Biden Administration’s embargo on AI chip exports to the Middle East has triggered a selloff in the broader sector.

VanEck Semiconductor ETF SMH and iShares Semiconductor ETF SOXX, representing the broader sector, are trading lower by close to 3%.

The U.S. government has initiated a review of high-volume sales to the United Arab Emirates and Saudi Arabia, which affect AI chip companies like Nvidia Corp NVDA and Advanced Micro Devices Inc, leading to a selloff in the stocks.

Washington issued similar restrictions on China in 2023, further exacerbating the geopolitical tensions between the countries. China is a leading semiconductor company in the market.

Other chip stocks including key Nvidia supplier Taiwan Semiconductor Manufacturing Co TSM, Broadcom Inc AVGO, Qualcomm Inc QCOM, Micron Technology, Inc MU, Arm Holdings Plc ARM, and Super Micro Computer Inc. SMCI are also trading lower.

Meanwhile, the CEOs of the chip companies have assembled at Taiwan’s Computex event to discuss the prospects of AI.

On Thursday, Mizuho analyst Vijay Rakesh reiterated a Buy rating on QCOM, MU, Western Digital Corp WDC, and Seagate Technology Holdings Plc STX and also raised their price targets, citing upcoming catalysts with Computex in Taiwan and Micron’s quarterly earnings in June.

Rakesh noted the next key driver for AI will be at the edge as OEMs start to push AI on-device capabilities for both handsets and PCs.

Rakesh flagged Qualcomm’s ramping AI PC with Snapdragon X Elite/ Plus, launching on 20+ models in the second half of 2024, on handsets with Snapdragon 8 Gen 3, and already launched with Samsung S24 Ultra and potential further wins at VOX.

He highlighted AI PCs requiring 40-80% higher DRAM content and handsets needing 50-100% more DRAM, a tailwind for Micron.

Also, Western Digital and Micron will likely see tailwinds from higher NAND content in AI devices with better pricing, as per Rakesh.

Seagate is better with higher PC storage content and improving cloud capex. Rakesh also said that there is a potential for 1 billion AI smartphones shipped from 2024 to 2027 and that AI PCs will make up over 60% of the PC market by the calendar year 2027.

Price Action: At the last check on Friday, NVDA shares were trading lower by 1.90% at $1,084.87.

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