by Semiconductors and chips were a hot topic for business in 2023, with the rise of artificial intelligence (AI) and the end of a long supply chain shortage.
Covid-19 brought a global halt in supply chains for a variety of computer parts, and increased demand for personal computers as people were stuck at home.
The chip shortage has affected a range of industries, including cars, computers and gaming. By April 2021, lead times for semiconductors from Broadcom had increased to 22.2 weeks, up from 12.2 weeks in February 2020.
By 2022, chips were deemed so strategically important that the US government passed the CHIPS Act, authorizing around $280bn (£222.7bn) in new funding to support domestic research and semiconductor manufacturing in the US, and appropriates $52.7bn of it.
Read more: Why you could pay more tax in 2024 – and five ways to avoid it
Here are the chip-related companies that have increased investor interest since 2024.
Nvidia (NVDA)
Information computing company Nvidia topped Google’s (GOOG) search rankings for chipmakers. It was a banner year in 2023, with the stock trebled year on year, as of December 11.
This was partly due to the launch of new products and the adoption of AI which brought revenue for its third quarter, which ended in October, to $18.1bn. Profits almost quadrupled to $9.2bn and its market valuation is now over $1tn.
As for what’s ahead, Nvidia is ramping up production of a much sought-after chip, the scarce H100. The company forecast sales of around $20bn for the current quarter, well above average analyst estimates of just under $18bn.
“Supply has increased significantly every quarter this year to meet strong demand, and we expect to continue to do so next year,” said Colette Kress, Nvidia’s chief financial officer, 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 increase its total addressable market to $400bn by 2027.
Recent deals and product releases mean that Meta Platforms ( META ) and Microsoft ( MSFT ) are among customers for its Instinct MI300X chip.
Although its share price has doubled in the past year, from about $64 to $133, it still faces the possibility of the US chip trade embargo with China.
micron (MU)
Memory chip maker Micron is one of three companies that make more than 90% of the world’s dynamic random access memory (DRAM) chips. The others are South Korea-headquartered Samsung ( BC94.L ) and SK Hynix. That means Idaho-based Micron is the only manufacturer in the United States.
Although it also had a great year, the threat of a ban in China weighs heavily on the minds of company executives because about a quarter of Micron’s revenue comes from the economic superpower. CEO Sanjay Mehrotra has previously said that around half of its revenue is at risk.
Intel watchers will be watching until the end of 2024 to see if it can really close the gap with its foreign rivals on 2nm chips – the kind of technology that could power the next generation of smartphones, data centers, and AI.
The company is calling its new chip the node 18A, and it is reportedly being tested at tech conferences, with production expected to begin in late 2024. This release date could be the first chipmaker to integrate it with next generation technology.
Even without this release, the company’s stock price was up from $26.70 per share at the start of 2023 to $42.7pa a share in December.
Arm was one of the most anticipated IPOs of 2023, but it’s off to a great start since its inception. This was partly due to analysts questioning the company’s value as it grapples with uncertainty about how new accounting rules for revenue from major licensing deals can be recognised.
The company has said it wants to expand beyond its core products, into other areas such as data center servers and personal computer chips.
ASE Technology (ASX)
Taiwanese company ASE has also seen a significant drop in its stock price over the past year despite seeing slower inventory depletion due to weak market demand by mid-year.
Continued macroeconomic constraints and a shift in consumer spending were also expected to act as trigger points.
The company is actively pursuing various ways to reduce costs, including expanding its automation efforts. Due to the higher utility rates imposed by the Taiwanese government, its utility costs are expected to increase sequentially.
TSMC (TSM)
TSMC leads the global market in processors and has revealed test results of its “N2” – or 2 nanometer – prototype chips to some of its biggest customers, including Apple ( AAPL ) and Nvidia, the Financial Times reported. TSMC was offering the new technology at a discount to try to attract high-profile customers, sources said.
According to analysts at Zachs, Taiwan-based TSMC’s sales are expected to fall 4.7% year over year. For the current and next fiscal year, estimates of $66.5bn and $80.5bn represent -12.4% and +21.1% changes, respectively.
Chip producer ASML is also grappling with a slowdown in the industry and the ban on trade with China. December saw a high-level management change that could inspire hope for the future. Chief executive Peter Wennink is to step down in April to make way for Christophe Fouquet, a chip industry veteran who is currently chief business officer.
ASML machines are key to producing cutting-edge chips at manufacturers such as Taiwan Semiconductor Manufacturing Company (2330.TW) and Samsung Electronics
Shares have risen by almost 14% over the past year to value the Veldhoven-based company at around €250bn.
Broadcom (AVGO)
Broadcom’s stock has risen in recent months following a number of analyst endorsements. Citi recently achieved a ‘Buy’ rating on the stock which has gained more than 80% year to date.
The company expects significant headwinds from the increased processing power required for AI, despite slowing sales and macro issues.
See: 2024 IPO outlook: There is a ‘big backlog’, says bank executive
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