Chip Stocks Experience Volatility Amid Market Uncertainty and Political Factors

Why Chip Stocks Bounced Higher on Monday

What a difference a week can make on the stock market. This truism seemed to be very much in force for microchip stocks on Monday. After last week's sell-off, many got off to a roaring start with the new trading week. Asian powerhouse Taiwan Semiconductor Manufacturing (NYSE: TSM) rose by over 2% on the day, as did its busy U.S. peer Broadcom (NASDAQ: AVGO). Lapping them both was chipmaking equipment specialist Lam Research (NASDAQ: LRCX), which posted a nearly 7% gain. Chip worries melting away? Whenever a sector or stock is hit by a widespread investor sell-off, discount hunters wait in the wings for a good time to buy on the cheap. That largely holds true for an asset that isn't clearly in dire straits, and the semiconductor industry is hardly doing badly right now. Artificial intelligence functionalities need the most powerful next-generation processors available, and the better chip companies like Taiwan Semi have effectively positioned themselves to take advantage. Which raises the question -- why was there a sell-off at all? Last Wednesday, a report in Bloomberg said that the Biden administration is considering the imposition of more severe controls on chip companies' exports to China. While the country's economy has had its stumbles it is still a massive market, particularly for tech components such as microprocessors. A tighter export regime would doubtlessly affect the business -- and not in a good way -- of every chipmaker with Chinese sales. There was also some indication that if Donald Trump were elected U.S. president, he might take a relatively soft approach to China's foreign policy. In the extreme, this could mean a successful Chinese invasion of Taiwan, the island nation it badly covets (and home, of course, to Taiwan Semi). At this point, both can only be considered speculation. And there are certain chip market watchers that think such developments won't come to pass. Among these is researcher Lynx Equity Strategies, which on Monday published a new analysis of the current state of the chip industry. It argued in its report that Taiwan Semi has positioned itself to be insulated from the U.S. government policy in regards to Taiwan. It added that since this is an election year, the Biden administration might be too late to introduce such a drastic change to its existing China policy. A good time to buy on price weakness Personally, I'd lean more toward Lynx's argument. This doesn't feel like the time for sudden, and potentially violent, changes in our relations to China and in that country's approach to Taiwan. Meanwhile, demand is hot and heavy for the wares sold by Taiwan Semi, Broadcom, Lam Research, and many other chipmakers. Taking advantage of the share price dip in these stocks feels like a sensible move to me. Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now? Before you buy stock in Taiwan Semiconductor Manufacturing, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Taiwan Semiconductor Manufacturing wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $722,626!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lam Research and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Why Chip Stocks Bounced Higher on Monday | The Motley Fool

Fears of U.S. restrictions on the sector's trade with China seem to be fading. What a difference a week can make on the stock market. This truism seemed to be very much in force for microchip stocks on Monday. After last week's sell-off, many got off to a roaring start with the new trading week. Asian powerhouse Taiwan Semiconductor Manufacturing (TSM 2.16%) rose by over 2% on the day, as did its busy U.S. peer Broadcom (AVGO 2.36%). Lapping them both was chipmaking equipment specialist Lam Research (LRCX 6.54%), which posted a nearly 7% gain. Whenever a sector or stock is hit by a widespread investor sell-off, discount hunters wait in the wings for a good time to buy on the cheap. That largely holds true for an asset that isn't clearly in dire straits, and the semiconductor industry is hardly doing badly right now. Artificial intelligence functionalities need the most powerful next-generation processors available, and the better chip companies like Taiwan Semi have effectively positioned themselves to take advantage. Which raises the question -- why was there a sell-off at all? Last Wednesday, a report in Bloomberg said that the Biden administration is considering the imposition of more severe controls on chip companies' exports to China. While the country's economy has had its stumbles it is still a massive market, particularly for tech components such as microprocessors. A tighter export regime would doubtlessly affect the business -- and not in a good way -- of every chipmaker with Chinese sales. There was also some indication that if Donald Trump were elected U.S. president, he might take a relatively soft approach to China's foreign policy. In the extreme, this could mean a successful Chinese invasion of Taiwan, the island nation it badly covets (and home, of course, to Taiwan Semi). At this point, both can only be considered speculation. And there are certain chip market watchers that think such developments won't come to pass. Among these is researcher Lynx Equity Strategies, which on Monday published a new analysis of the current state of the chip industry. It argued in its report that Taiwan Semi has positioned itself to be insulated from the U.S. government policy in regards to Taiwan. It added that since this is an election year, the Biden administration might be too late to introduce such a drastic change to its existing China policy. Personally, I'd lean more toward Lynx's argument. This doesn't feel like the time for sudden, and potentially violent, changes in our relations to China and in that country's approach to Taiwan. Meanwhile, demand is hot and heavy for the wares sold by Taiwan Semi, Broadcom, Lam Research, and many other chipmakers. Taking advantage of the share price dip in these stocks feels like a sensible move to me.

Asian Chip Stocks Drop Further on Profit-Taking, U.S. Political Uncertainty

Asian chip stocks lost further ground, dragged by a mix of profit-taking, uncertainty about the U.S. political landscape and concerns about America's future commitment to Taiwan's security. Taiwan Semiconductor Manufacturing Co., the world's largest contract chip maker, dropped 3.2% Monday despite reporting a profit beat and lifting its full-year outlook late last week, while Taiwan-based Foxconn Technology Group, which is witnessing surging demand for its AI servers, ended 5.6% lower, its largest one-day percentage loss in two years. The two index heavyweights' losses sent Taiwan's Taiex down 2.7%. In South Korea, Samsung Electronics, the world's largest maker of memory chips, ended 1.7% lower, while rival SK Hynix shed 2.15%. Tokyo Electron slipped 2.6% in Japan. China's largest chip maker, Semiconductor Manufacturing International Corp., lost 0.4% in mainland trading but climbed 2.3% in Hong Kong amid a broader tech rally in the Asian financial hub. Morningstar analyst Phelix Lee attributed the selloff in Taiwan partially to profit-taking. TSMC and Foxconn have risen 58% and 84%, respectively, this year amid the artificial-intelligence boom. Meanwhile, some investors are pricing in a higher chance of a Donald Trump presidency in the U.S., analysts said, after President Biden's weekend decision not to run for re-election. Over the past 75 years, only two Democratic presidents have dropped out of a presidential race, and both of their successors lost to Republican candidates in elections. The Democratic candidate could face some chaos in the short term, while Trump has more time to win over voters, said Arisa Liu, a semiconductor research director at the Taiwan Institute of Economic Research. If Trump is re-elected, "how he will deal with the uncertainty and high risks brought by the ongoing tense Taiwan Strait dispute could bring unpredictability to global technology and economic conditions," Liu said. Taiwan chip stocks sold off last week following Trump's hawkish remarks that took aim at the economy's chip-production dominance, including saying in an interview with Bloomberg Businessweek that the island should pay the U.S. for defense. TSMC, which produces about 90% of the world's advanced chips and counts Nvidia and Apple as clients, is pivotal in the global semiconductor supply chain. The simmering threat of a Chinese invasion and the emergence of chip manufacturing as a geopolitical priority have pushed it to spread out geographically, including with plans to spend more than $65 billion on new plants in Arizona. Still, analysts said a Trump presidency is unlikely to hurt the emerging AI revolution or the tech bull market. As Trump is trying to win the presidency, he wants to assure the voters that he will fight for the trade imbalance, but not at the cost of risking the U.S.'s global AI leadership, said Daniel Newman, chief executive of global tech advisory Futurum Group. "The bark will be way worse than the bite on the U.S.-China cold tech war fears," Wedbush analyst Daniel Ives said in a research note.

What's Going On With AI Chip Stocks Nvidia, AMD And Taiwan Semi On Monday? - NVIDIA (NASDAQ:NVDA), Advanced Micro Devices (NASDAQ:AMD), Taiwan Semiconductor (NYSE:TSM)

AI chip stocks, including Nvidia and AMD, opened higher after China's rate cuts. Taiwan Semiconductor Manufacturing Co TSM stock opened lower Monday premarket as U.S. President Joe Biden withdrew from the 2024 Presidential race. On Sunday, Biden, 81, revealed his decision through a letter on social media platform X after a lackluster debate performance and increasing pressure from fellow Democrats to step aside. The broader artificial intelligence chip sector led by Taiwan Semiconductor, Nvidia Corp NVDA, and Advanced Micro Devices, Inc AMD noted a selloff last week after former President Donald Trump suggested that Taiwan should compensate the U.S. for its defense, highlighting the lack of a formal defense treaty. Additionally, last week, reports indicated the U.S. intensified its advanced semiconductor sanctions against China, a significant market for Nvidia and its U.S. peers. SPDR S&P 500 ETF Trust SPY, representing the US S&P500 index, lost 2.4% last week. iShares China Large-Cap ETF FXI, representing China, lost over 4%. The AI chip stocks, including Nvidia and AMD, opened higher Monday premarket, reversing last week's losses. Nvidia is reportedly developing a new AI chip tailored to meet US export restrictions for the Chinese market. Reports indicated Nvidia collaborating with Inspur, a key distribution partner in China, to introduce and distribute the new chip, tentatively named "B20," which is part of Nvidia's "Blackwell" series. The chip stocks also got a boost from China, which lowered key interest rates. China is a key AI chip market. However, it faces several economic challenges, including weak growth in the second quarter and looming deflation. On Monday, the People's Bank of China (PBOC) announced that it would cut the seven-day reverse repo rate to 1.7% from 1.8% and reduce the one-year loan prime rate (LPR) to 3.35% from 3.45%. Additionally, Reuters reports that China lowered the five-year LPR to 3.85% from 3.95%. Price Actions: At the last check on Monday, NVDA was up 1.76% at $120 premarket. AMD was up 1.10% at $153.25. TSM was down 1.06% at $164.02. Photo via Shutterstock Market News and Data brought to you by Benzinga APIs

Nvidia, Apple Supplier TSMC And Other US-Listed Taiwan Stocks Trading Lower In Pre-Market After Biden Quits Presidential Race - ASE Tech Holding Co (NYSE:ASX), Taiwan Semiconductor (NYSE:TSM)

Taiwan Semiconductor Manufacturing Company Ltd. TSM and other leading Taiwanese stocks have taken a hit in the U.S. pre-market following the announcement of U.S. President Joe Biden's withdrawal from the presidential race. What Happened: TSMC's shares dropped 1.25% in the U.S. pre-market on Monday after a more than 3% fall in Taipei. Other Taiwanese stocks, including United Microelectronics Corp. UMC and ASE Technology Holding Co., Ltd. ASX, also experienced a dip in the US pre-market by 1.28% and 0.73% respectively. Foxconn, a significant Nvidia AI server maker, saw its stock price plunge nearly 6% in Taiwan. The Taiex index, which had seen a nearly 28% rise this year as of July 19, plummeted almost 700 points, or 3.04%, at one point on Monday. See Also: Black-Swan Investor Says 'Greatest Bubble In Human History' Is On The Verge Of Bursting, Calls Stocks 'Mega-Tinderbox-Time Bomb' Why It Matters: Taiwan's Foreign Minister Lin Chia-lung had previously asserted that Taiwan must depend on itself for defense and is expected to further boost spending and modernize its military in response to the threat posed by China. Last week, TSMC shares were also trading following Trump's suggestion that Taiwan should compensate the United States for its defense, raising concerns about the impact on Taiwan's chip industry and the country's stock market. Reports of Biden contemplating stricter trade restrictions with China further jolted the rest of the semiconductor. Read Next: Analyst Predicts Bitcoin To Soar By 83%, But There's One Major Catch: 'We're Going To Get That Continuation As Long As ...' Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors. Image via Shutterstock Market News and Data brought to you by Benzinga APIs