Semiconductor welcomes a good start in 2023. $Philadelphia Semiconductor Index(SOX)$ has soared 6.72% since the year, way better than $S&P 500(.SPX)$ 's 1.57%. On Jan 9th, $NVIDIA Corp(NVDA)$ increased 5.18%, $Advanced Micro Devices(AMD)$ rose 5.13%, with most of the industry booming.
There are two main reasons intrigue the positive situation.
- Some Chips demand are expected to return in 2023;
- Shorts are keep closign positions.
Why is demand returning?
Crypto is definitely not a choice. Mining is no longer an good investment for most players. With the crash of crypto's prices, market is already fully priced-in the weak demand of chips in 2022.
However, when some sub-industry are cutting orders, like RAM and HD, some others are in recovery.
First, the recovery of gaming will bring demand of GPU back. Earlier, Nvidia CFO said that the game business would return to largely normal after January 23. Although the global economy is facing recession pressure at present, companies from the game industry tend to perform strongly in the downward cycle.
Moreover, China's current reopening is expected to be optimistic, new game has also been approved, which is also beneficial to the overall demand of game chips.
Nvidia, has latest products such as RTX 40xx series and Ada Lovelace is expected to pick up. Same for AMD, with newly launched RX 7000 series. Both are expected to break out in 2023.
Second,high-speed networking products and data centers continues to stimulate high-performance chips. AI, natural language processing and other applications, all of them need more high-speed chips with high-performance computing power.
In addition, automobile industry also increase the demand for auto-chips, like in autonomous driving and other technologies.
In CES 2023 Mercedes-Benz announced that it would use NVIDIA Omniverse platform to design and plan manufacturing and assembly plants.$Byd Company Limited(002594)$ also shows the intelligent cockpit of the car equipped with NVIDIA GeForce NOW cloud game service technology.
In 2023, the semiconductor industry may not be completely affected by the recession, and the performance of different companies may be differentiated to some extent.
Upstream companies are relatively more stable in terms of performance and market value, such as lithography machines$ASML Holding NV(ASML)$, as well as the first financial report to be announced on Thursday$Taiwan Semiconductor Manufacturing(TSM)$The performance in the past month was better than that of the semiconductor index.
Lets' compare their valuation.
NVIDIA and AMD have similar P/E ratios, which are lower than the average dynamic P/E ratio of 5 years at present, and AMD's valuation is lower.
ASML is valued at around the five-year average, while TSM trades at below the five-year average.
This could be the reason $Berkshire Hathaway(BRK.A)$ take stakes in TSMC.
Comments
There are a few hot-rodders that have to have the best at any price but the rest of the market is staying out or buying the previous 3000 series. They make PCs look bad when you can get an entire PS5 for less than one of their 'mid-range' cards.
Perhaps they can make up the shortfall in the server space?
Their next sales call will be interesting.