The chip sector slumped Friday for its third 6% one-day drop of the year after U.S. regulators moved to curb China’s military ambitions by imposing broader restrictions on semiconductors and technology of AI that can be sold to the second largest in the world. economy.
On Friday, the US Department of Commerce expanded its list of chip technologies that require a license to sell to China – essentially a euphemism for a ban if the license can be denied – and the PHLX Semiconductor Index SOX,
which was down about 3% before the news broke, fell to close the session down 6.1% at 2356.75, a closing level investors last saw rising early. November 2020.
News of the ban broke fresh on the back of Advanced Micro Devices Inc. AMD,
issuing a $1 billion shortfall warning on expected sales to PC customers on Thursday night. This followed last week’s MU revenue forecast from memory chip maker Micron Technology Inc.,
which was about $1 billion below Street’s expectations, prompting analysts to question whether 2022’s sudden glut of chips is worse than 2019. AMD shares led the drop in chip stocks down 13.9% to close at $58.44, Micron shares were down modestly. 2.9% to $52.91.
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Friday’s drop is just the SOX index’s worst one-day drop since Sept. 13, when it fell nearly 6.2%. In fact, Friday’s drop is only the third-worst one-day performance of the year for the SOX index, with June 16’s drop of just over 6.2% being the worst, according to the data. of FactSet.
The Commerce Department’s broader list adds to a September one that focused on Nvidia Corp’s AI technology. NVDA,
Nvidia shares fell 8% to close at $120.76 on Friday.
Nvidia shares tumbled last month when the graphics processing unit maker disclosed the list of products requiring licensing to be sold in China, mostly the company’s A100 and H100 data center AI technology. , and estimated a potential impact of $400 million in the third quarter forecast. revenue if the licenses were refused. The ban just added to Nvidia’s bleeding year as it slashed its outlook not once, not just twice, but three times. Still the largest US chipmaker by market capitalization, Nvidia ended Friday with a high of $304.2 billion.
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China’s chip technology bans are nothing new: Just over two years ago, a ban focused on the machinery needed to turn silicon wafers into finished chips, equipment made by companies like Lam Research Corp. LRCX,
and KLA Corp. KLAC,
and in 2018 it was Micron and memory chips. Shares of Lam fell 5.7% on Friday, while those of KLA were down 4.1%.
Elsewhere in the sector, shares of Intel Corp. INTC,
fell 5.4% on Friday, while shares of Qualcomm Inc. QCOM,
fell 3.5% and Broadcom Inc. AVGO,
shares fell 4%. Shares of Texas Instruments Inc. TXN,
which happens to be the largest U.S. automotive chip supplier, fell 4.4%.
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As for the third-party factories that produce the silicon wafers that become microchips, the shares of Taiwan Semiconductor Manufacturing Co. TSM,
shares were down 6.2%, and GlobalFoundries Inc. GFS,
shares fell 5.2%. Shares of Marvell Technology Inc. MRVL,
which in August disappointed with its data center forecast, also took an 11.7% beating to close at $42.35.
During 2022, the SOX index fell 40% over the year, with AMD and Nvidia shares plummeting nearly 60%, while the S&P 500 SPX index,
lost 24%, and the tech-heavy Nasdaq Composite Index COMP
fell 32%.
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