Chip stocks volatile with China-US spat in focus (updated)

Monolithic Power Systems

18/07/2024 22:55

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      Asia chip stocks extend heavy selloff, U.S. trading choppy
    

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      TSMC closes down, posts better-than-expected earnings
    

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      ASML adds to losses from previous session
    

  
 (Updates prices, adds comments after U.S. stock market close)
    By Sinéad Carew and Youn Ah Moon
       NEW YORK/SINGAPORE, July 18 (Reuters) - Trading in U.S.
chip stocks was choppy on Thursday with the Philadelphia
semiconductor index  .SOX  managing to close higher after
tumbling on Wednesday with its biggest contributions from a
handful of heavyweights Nvidia  NVDA.O  and Broadcom  AVG.O .
    Chip stocks in Asia had sold-off earlier in Thursday after a
report that the United States was considering tighter curbs on
exports of advanced chip technology to China. 
    Bloomberg News had reported that U.S. President Joe Biden's
administration was weighing a measure called the foreign direct
product rule that would allow the U.S. to stop a product from
being sold if it was made using American technology. 
    After the report the Global X Asia Semiconductor
exchange-traded fund  3119.HK  closed down 1.74% on Thursday
with declines in major holdings including SK Hynix  000660.KS ,
Tokyo Electron, Taiwan Semiconductor Manufacturing Co (TSMC)
 2330.TW , and Samsung Electronics  005930.KS . 
    The Philadelphia Semiconductor index had fallen 6.8% on
Wednesday for its weakest day since March 2020. The index had
opened up 1.7% on Thursday before falling more than 1% at its
low for the day and then closing the session up 0.5%. Its
biggest boosts were from Broadcom, up 2.9%, and Nvidia up 2.6%. 
    Their gains helped offset declines in stocks such as
Advanced Micro Devices  AMD.O , which closed down 2.2% after
falling more than 10% on Wednesday, in its biggest sell-off
since October 2022.
    Some analysts cited Wednesday's sell-off as a signal to
bargain hunt. Vedvati Shrotre at Evercore ISI wrote that the
near-term probability the trade curbs would be implemented is
low and pointed to "near-term weakness as a unique buying
opportunity." Also Vivek Arya at Bofa cited current volatility
as "enhanced opportunity in companies with best-profitability."
    But Daniel Morgan, portfolio manager at Synovus Trust
expects more volatility ahead with chip company earnings due in
coming weeks and both U.S. Presidential candidates, Donald Trump
and Joe Biden, "taking a tough line" on trade.
    "What you were seeing is buying on the weakness and then
investors coming to the awareness that this is going to be a
recurring concern as we head into the reporting season, that
companies with a high level of sales exposure to China may be
hurt," said Atlanta, Georgia based Morgan.
     He pointed to an almost 11% tumble in shares of ASML
 ASML.AS  on Wednesday to illustrate worries about chip
companies that disclose big exposure to China. Investors
overlooked strong results at ASML, the biggest supplier of
computer chip- making equipment, because roughly half its sales
came from China, Morgan said.
    But he noted that investors were equally worried about Trump
implementing tariffs when he was President yet "chip companies
have survived and have done extremely well since then." 
    
    Some of Thursday's volatility may have been caused by
investor fears that U.S. presidential candidate Donald Trump
would make comments about trade in a speech scheduled for later
in the day, said Gene Goldman, chief investment officer at
Cetera Investment Management, El Segundo, CA 
    "He may suggest more tariffs, which is a concern for
technology companies," said Goldman.
     TSMC, the world's largest contract chipmaker, has already
come under pressure from comments from Trump who said earlier
this week that Taiwan "did take about 100% of our chip business"
and should pay the U.S. for its defence.
    On Thursday TSMC showed some of the biggest declines in
Asia, shedding T$1.7 trillion ($52.1 billion) market value in
two days. But the manufacturer's U.S. traded shares  TSM.N 
closed up 0.4% on Thursday. 
    It likely helped that TSMC, the world's largest contract
chipmaker, raised its full-year revenue forecast on Thursday on
surging artificial intelligence (AI) related demand for chips.
    In Europe ASML shares had closed down 3.6% in Europe on
Thursday while its U.S. listed shares ended down 0.9%.
    In Asia, South Korean memory chipmaker SK Hynix had also
slid 3.6% while Japan's Tokyo Electron, had slumped 8.75%. 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
TSMC stocks selloff in the wake of Trump comments    https://tmsnrt.rs/3xYKyyj
Chip dip    https://tmsnrt.rs/4fcnDjR
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 (Reporting by Sinéad Carew and Saqib Iqbal Ahmed in New York,
Youn Ah Moon and Joyce Lee in Seoul, Jeanny Kao in Taipei, Ankur
Banerjee in Singapore and Alun John in London; Writing by Rae
Wee; Editing by David Evans and Stephen Coates)
 ((sinead.carew@thomsonreuters.com; +13322191897;))