Semiconductors and chips proved to be a hot talking point in 2023 for business, with the rise of artificial intelligence (AI) and what seemed to be the end of a prolonged supply chain-induced shortage.
Covid-19 brought a global standstill in supply chains for a variety of computer parts, and a rise in demand for personal computers as people were stuck at home.
Chip shortages impacted a swathe of industries, including cars, computers and gaming. By April 2021, lead times for semiconductors from Broadcom had extended to 22.2 weeks, up from 12.2 weeks in February 2020.
By 2022, chips were considered so strategically important that the US government passed the CHIPS Act, authorising roughly $280bn (£222.7bn) in new funding to boost domestic research and manufacturing of semiconductors in the United States, of which it appropriates $52.7bn.
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Here are the chip-related companies that have piqued investor interest going into 2024.
Nvidia (NVDA)
Intelligence computing company Nvidia was the top of the pile when it came to Google (GOOG) search rankings for chip-makers. It had a banner year in 2023, with the stock more than tripling year-on-year, as of 11 December.
This was due in part to the launch of new products and AI uptake which brought revenue for its third quarter, which ended in October, to $18.1bn. Profit surged nearly fourteenfold to $9.2bn and its market valuation is now above $1tn.
As for what’s ahead, Nvidia is stepping up production of a highly sought after chip, the H100, that has been in short supply. The company predicted sales of about $20bn for the current quarter, well above analysts’ average estimates of just under $18bn.
“We have significantly increased supply every quarter this year to meet strong demand, and expect to continue to do so next year,” Colette Kress, Nvidia’s chief financial officer, said during a conference call with analysts in November.
Advanced Micro Devices (AMD) has emerged as a challenger to heavyweight Nvidia and recently said it expects AI growth to boost its total addressable market to $400bn by 2027.
Recent deals and product releases mean it now counts Meta Platforms (META) and Microsoft (MSFT) among customers for its Instinct MI300X chip.
While its share price has more than doubled over the last year, from around $64 to $133, it still faces the potential prospect of being hit by the embargo on US chip trade with China.
Micron (MU)
Memory chip maker Micron is one of just three companies that make more than 90% of the world’s dynamic random-access memory (DRAM) chips. The others are Samsung (BC94.L) and SK Hynix which are both headquartered in South Korea. That means Idaho-based Micron is the only manufacturer in the US.
While it has also had a stellar year, the risk of a China ban is also weighing heavy on company executives’ minds as about a quarter of Micron’s revenue comes from the economic superpower. CEO Sanjay Mehrotra previously said about half of its revenue is at risk.
Intel watchers will be looking to the end of 2024 to see if it can really close the gap with its foreign rivals on 2nm chips — a type of tech which could power the next generation of smartphones, data centres, and AI.
The company is calling its new chip the 18A node, and is reportedly trialling it at tech conferences, with an eye on production beginning late-2024. This release date could make it the first chipmaker to integrate it into next gen tech.
Even without this release, the company’s stock price was up from $26.70 per share at the beginning of 2023 to $42.7p a share in December.
Arm was one of the most anticipated IPOs of 2023, but has got off to a rocky start since its debut. This was partially due to analysts questioning the company’s value as it grappled with uncertainty over how new accounting rules on revenue from large licensing deals can be recognised.
The company has said it is also looking to expand beyond its core products, into other areas such as data centre servers and personal computer chips.
ASE Technology (ASX)
Taiwanese company ASE has also seen a considerable stock bump in its stock price over the last year despite seeing slower inventory depletion due to weak end market demand by mid-year.
Continued macroeconomic constraints and a shift in consumer spending were also anticipated to have acted as headwinds.
The company has been actively pursuing various routes to reduce costs, including expanding its automation efforts. Due to the higher utility rates brought up by the Taiwan government, its utility costs are expected to have risen sequentially.
TSMC (TSM)
TSMC dominates the global market in processors and revealed test results for its “N2” chip — or 2 nanometre — prototypes to some of its biggest customers, including Apple (AAPL) and Nvidia, the Financial Times reported. TSMC had been offering the new tech at a discount in a bid to attract big-name customers, sources said.
According to analysts at Zachs, Taiwan-based TSMC’s sales are estimated to fall year-over-year by 4.7%. For the current and next fiscal years, $66.5bn and $80.5bn estimates indicate -12.4% and +21.1% changes, respectively.
Chip producer ASML has also been grappling with a slowdown in the industry and the ban on trade with China. In December it saw a top-level management change which could spell hope for the future. CEO Peter Wennink is set to step down in April to make way for Christophe Fouquet, a chip industry veteran who is currently chief business officer.
ASML machines are vital to the production of cutting-edge chips at manufacturers such as Taiwan Semiconductor Manufacturing Company (2330.TW) and Samsung Electronics
Shares have risen close to 14% in the past year to value the Veldhoven-based company at about €250bn.
Broadcom (AVGO)
Broadcom’s stock has been on the up in recent months after several endorsements from analysts. Most recently Citi slapped a ‘Buy’ rating on the stock which has gained more than 80% year-to-date.
The company is expecting significant windfall from the increased processing power needed for AI, despite slowing sales and macro issues.
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