In this article, we will be taking a look at the US-China semiconductor war: 5 stocks to watch. To read our detailed analysis of the rivalry between American and Chinese tech companies, and the stocks impacted by this rivalry, you can go directly to see the US-China Semiconductor War: 10 Stocks to Watch.
5. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 69
Micron Technology, Inc. (NASDAQ:MU) is an IT company working to design and manufacture memory and storage products for sale worldwide. The company is based in Boise, Idaho.
On September 13, Exane BNP Paribas’ analyst Karl Ackerman initiated coverage of Micron Technology, Inc. (NASDAQ:MU) shares with an Outperform rating. The analyst also placed a $75 price target on the stock.
While Micron Technology, Inc. (NASDAQ:MU) was among the stocks that fell by more than 1% after Nancy Pelosi’s visit to Taiwan, it is also one of the stocks that stand to gain during heightened tensions between the US and China. The company is set to benefit from new federal funding for chip-makers, sanctioned by the Biden administration.
Our hedge fund data shows 69 hedge funds long Micron Technology, Inc. (NASDAQ:MU) in the second quarter, with a total stake value of $2.2 billion.
Meridian Funds, managed by ArrowMark Partners, mentioned Micron Technology, Inc. (NASDAQ:MU) in its second quarter 2022 investor letter. Here’s what the firm said:
“Micron Technology, Inc. (NASDAQ:MU) is a leader in the production of DRAM and NAND memory. We invested in the stock in the third quarter of 2019 during a cyclical downturn in the memory industry. Our rationale was that, while the memory industry is cyclical, we believed there are strong secular drivers in place that will lead to higher peaks and long-term growth. Our secular thesis is based on our conviction that the quest for ever-increasing compute speeds will increasingly rely on memory to solve bottlenecks and that increased memory content in nearly everything from mobile phones to automobiles will drive demand. Micron’s stock traded lower during the quarter due to macroeconomic concerns that led to lower earnings expectations. We increased our stake in the company, as we believe our secular thesis remains intact. We wanted to take advantage of what we view as temporary cyclical concerns that caused the stock to trade at less than 10x reasonable trough earnings per share (EPS) estimates and less than 7x recent peak EPS.”
4. QUALCOMM, Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 71
QUALCOMM, Incorporated (NASDAQ:QCOM) works to develop and commercialize foundational technologies for the wireless industry. The company is based in San Diego, California.
On July 29, Ingo Wermann at DZ Bank placed a Hold rating on QUALCOMM, Incorporated (NASDAQ:QCOM) shares. The analyst also placed a $150 price target on the stock.
This July, global semiconductor industry sales grew to reach $49 billion, showcasing a 7.3% increase year over year. QUALCOMM, Incorporated (NASDAQ:QCOM) was one of the major contributors to these rising sales in that month. Yet in August, with heightened tensions between the US and China over the semiconductor industry, many US stocks including QUALCOMM, Incorporated (NASDAQ:QCOM) ended up falling by over 1%. It might be worthwhile to keep an eye on the company’s performance in the coming few months.
Out of 895 hedge funds, 71 funds were long QUALCOMM, Incorporated (NASDAQ:QCOM) in the second quarter, compared to 73 funds in the previous quarter. Their total stake values were $2.8 billion and $3.6 billion respectively.
3. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 72
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a semiconductors company that manufactures, packages, tests, and sells integrated circuits and other devices. The company operates in Taiwan, China, Europe, the Middle East, Africa, Japan, the US, and internationally.
Daiwa’s Rick Hsu upgraded shares of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) to Buy from Outperform on September 14.
With Sino-American tensions in the semiconductor space rising ever higher, the US Commerce Department has continued issuing new export rules to block semiconductor shipments. One such export rule is targeting shipments to Huawei, due to which Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) had to halt orders for Huawei’s HiSilicon unit this May. The company is being impacted by the US-China semiconductor war in multiple ways.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was found among the 13F holdings of 72 hedge funds in the second quarter. Their total stake value was $9.2 billion.
Mawer Investment Management, an asset management company, mentioned Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its second quarter 2022 investor letter. Here’s what the firm said:
“More recently, as concerns about the economic outlook have grown, it is no longer just inflationary concerns and discount rate considerations that are impacting stock prices. Given an increasing probability of a recession, stock prices declined for holdings such as Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), a business where end market demand could wane in a recessionary environment, and Ashtead Group, an economically sensitive construction equipment rental company. In both of these cases the pullback is due less from recent results, and more from uncertainty in the economic outlook. More cyclical businesses such as those within metals and mining also experienced sharp declines over the second quarter. Our general underweight exposure to such materials businesses, which we believe are typically less competitively advantaged, had a positive impact on relative performance.”
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
NVIDIA Corporation (NASDAQ:NVDA), an IT company, offers graphics, and compute and networking solutions. The company operates in the US, Taiwan, China, and internationally.
Vijay Rakesh, an analyst at Mizuho, holds a Buy rating on NVIDIA Corporation (NASDAQ:NVDA) shares as of September 15. The analyst also placed a $205 price target on the stock.
The US Commerce Department’s newest rules and restrictions on semiconductor trades have instructed companies including NVIDIA Corporation (NASDAQ:NVDA) to halt their shipments to China. The company needs to acquire a license to trade in China, especially if its shipments include artificial intelligence computing chips.
There were 84 hedge funds long NVIDIA Corporation (NASDAQ:NVDA) in the second quarter, and 102 hedge funds long the stock in the previous quarter. Their total stake values were $3.3 billion and $6.4 billion respectively.
Baron Funds, an asset management firm, mentioned NVIDIA Corporation (NASDAQ:NVDA) in its second quarter 2022 investor letter. Here’s what it said:
“At the company-specific level, there was a broad correction across the entire portfolio. While four of our holdings contributed to performance, the contribution to absolute returns was less than 100bps combined, as unfortunately none of them were large enough to move the needle. We had 16 investments detracting over 100bps each with NVIDIA (NASDAQ:NVDA), our second largest detractor, costing the Fund 254bps.
NVIDIA’s stock was hit even harder, down 44.4%, impacted by concerns over the health of the consumer, dramatic declines in crypto, and COVID-related lockdowns in China. Despite the sell-off and the increased near-term volatility in its gaming business, NVIDIA’s revenues grew 46% year-over-year with 48% operating margins, driven by continued strength in its data center business as companies across industries adopt AI and ML…” (Click here to see the full text)
1. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 87
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global semiconductor company. It operates through its Computing and Graphics, and Enterprise, Embedded, and Semi-Custom segments.
Mizuho’s Vijay Rakesh holds a Buy rating on Advanced Micro Devices, Inc. (NASDAQ:AMD) shares as well, as of September 15. The analyst holds a $125 price target on the stock.
Alongside NVIDIA Corporation, the Department of Commerce’s rules prohibiting US companies from shipping AI computing chips to China also impacts Advanced Micro Devices, Inc. (NASDAQ:AMD). Advanced Micro Devices, Inc. (NASDAQ:AMD) was also instructed to halt all shipments of the targeted chips that were to be sent to China, presumably because of heightened US-China tensions.
Advanced Micro Devices, Inc. (NASDAQ:AMD) had 87 hedge funds long its stock in the second quarter, with a total stake value of $4.8 billion.
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