Chip stocks, low on juice?
Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted by U.S. News & World Report in an article — by reporter Brian O’Connell, “7 Best Semiconductor Stocks to Buy Now” — regarding a possible AI-driven recovery in chip stocks.
The upsetting issue for the U.S. semiconductor industry is the recent abrupt change to the rules set by the administration only last year. On the other hand, looking forward, artificial intelligence and generative AI will create massive demand for new chips.
Quoted article excerpts are below:
“Investors should be aware that the U.S. is implementing restrictions on the sale of chips manufactured by Nvidia and others specifically tailored for the Chinese market,” says Michael Ashley Schulman, chartered financial analyst and chief investment officer of Running Point Capital Advisors, based in El Segundo, California. “These restrictions are part of new regulations to impede China’s access to cutting-edge semiconductors with potential space, AI and military applications.”
The U.S. semiconductor industry has been dealing with this abrupt change in rules, which has weighed on stocks. “A shifting regulatory environment may distress advanced semiconductor companies, especially since they have to plan chip design and production many months and sometimes years in advance,” Schulman says.
The Biden administration’s curbs on China’s access to U.S. semiconductor tech is stifling NVDA share growth. “The more stringent U.S. government controls focus on Nvidia’s A800 and H800 chips,” Schulman explains. “Those chips were developed for export to China following the initial (microchip) restrictions introduced by the Biden administration last October. That’s not helping Nvidia right now.”
The good news? Nvidia’s microchip power is expanding across the industry landscape, with the chip supplier starting to distance itself from the competition.
“There’s a David vs. Goliath scenario at play, since Nvidia dominates the chip market for the large language models that power generative artificial intelligence,” Schulman notes. “It’s still possible NVDA may be dethroned by a smart and resourceful startup or established player designing silicon or exotic materials for efficient niche computing. After all, once upon a time, Intel ruled the semiconductor roost.”
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