Nvidia and AMD Face New Export Restrictions to China
The United States government has imposed stricter export controls on advanced chips to China, impacting Nvidia and AMD. These restrictions target even the adjusted, less powerful chips designed to comply with previous export regulations.
Impact on Nvidia and AMD
- Previously, Nvidia and AMD modified their top-tier chips to meet export requirements, allowing them to sell to the Chinese market.
- The latest restrictions mean that even these modified chips, like Nvidia's H20, now require licenses for export, creating significant hurdles.
- Nvidia estimates a potential $5.5 billion revenue loss in the next quarter due to these new regulations.
- AMD faces a similar situation, with an estimated $800 million impact due to restrictions on exports of adjusted chips like the MI308.
Financial Implications and Market Reaction
The stricter export controls have led to a negative market reaction, with Nvidia's stock dropping nearly 7% and AMD's over 7% following the announcement. These potential losses impact projected revenue growth and operating income for both companies.
- Nvidia: If the $5.5 billion loss is fully recognized, operating income growth could drop from nearly 50% to around 17%, significantly impacting Wall Street's valuation expectations.
- AMD: A similar impact is expected for AMD, potentially turning a projected 30% revenue growth into a decline in operating income if the $800 million loss is fully recognized.
It's important to note that these losses might be temporary, with potential for revenue recovery in subsequent quarters if new buyers are found for these chips.
ASML's Performance and Challenges
ASML, a key supplier to semiconductor manufacturers, also experienced a stock dip. Their recent earnings report showed solid EPS, but shipment volumes faced challenges, potentially impacting future performance.
- ASML's shipments seem primarily directed towards TSMC, with Intel possibly not utilizing them extensively.
- Despite these challenges, ASML maintained its guidance, signaling resilience amid trade concerns.
TSMC's Strong Performance and Outlook
TSMC, Taiwan Semiconductor Manufacturing Company, released a strong earnings report, exceeding expectations and playing a crucial role in the semiconductor industry.
Key Financial Highlights
- Revenue reached 839 billion NTD, representing a 41.6% year-over-year growth.
- Gross margin stood at 58.8%, exceeding initial guidance.
- EPS grew by an impressive 60.4% year-over-year.
- TSMC is currently acting like the savior for the market right now.
Guidance and Future Prospects
TSMC's guidance for the next quarter projects continued growth, indicating a strong outlook for the company.
- Revenue is expected to be between $28.4 billion and $29.2 billion USD, representing approximately 38% year-over-year growth.
- Operating income is projected to increase by around 50%.
Capital Expenditure and Valuation
TSMC is significantly increasing its capital expenditure, reflecting its commitment to future growth.
- Capital expenditure for the current quarter reached 330 billion NTD, an 80% increase compared to previous periods.
- Despite its strong performance and growth prospects, TSMC's valuation remains relatively low, suggesting it may be undervalued.
- TSMC is undervalued
Overall Assessment
While the export restrictions on Nvidia and AMD pose challenges, TSMC's strong performance and growth outlook offer a positive perspective for the semiconductor industry. The long-term impact of these restrictions remains to be seen, but TSMC's continued success suggests a resilient and growing market.
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