by Semiconductors and chips turned out to be a hot topic for companies in 2023, with the rise of artificial intelligence (AI) and what appeared to be the end of a prolonged supply chain-induced shortage.
Covid-19 caused a global shutdown of supply chains for a variety of computer parts and a surge in demand for personal computers as people were stuck at home.
The chip shortage affected a wide range of industries, including cars, computers, and gaming. By April 2021, Broadcom’s semiconductor delivery times had extended to 22.2 weeks, up from 12.2 weeks in February 2020.
By 2022, chips were considered so strategically important that the US government passed the CHIPS Act, authorizing approximately $280 billion (£222.7 billion) in new funding to boost domestic semiconductor research and manufacturing in the United States, from which appropriates 52.7 billion dollars.
Read more: Why you could pay more taxes in 2024 and five ways to avoid it
These are the chip-related companies that have sparked investor interest heading into 2024.
Nvidia (NVDA)
Intelligence computing company Nvidia topped the rankings when it came to search rankings for chip makers on Google (GOOG). It had a banner year in 2023, with the stock more than tripling year over year, as of December 11.
This was partly due to the launch of new products and the adoption of AI, which drove revenue for its third quarter, which ended in October, to $18.1 billion. Profits increased nearly fourteen-fold to $9.2 billion and its market valuation now exceeds $1 trillion.
As for what’s ahead, Nvidia is ramping up production of a highly sought-after chip, the H100, which has been in short supply. The company predicted sales of about $20 billion for the current quarter, well above average analyst estimates of just under $18 billion.
“We have significantly increased supply each quarter this year to meet strong demand, and we expect to continue doing so next year,” Colette Kress, Nvidia’s chief financial officer, said during a conference call with analysts in November.
Advanced Micro Devices (AMD) has emerged as a challenger for heavyweight Nvidia and recently said it expects AI growth to boost its total addressable market to $400 billion by 2027.
Recent deals and product launches mean it now counts Meta Platforms (META) and Microsoft (MSFT) among customers for its Instinct MI300X chip.
While its stock price has more than doubled over the past year, from around $64 to $133, it still faces the potential of being hit by the embargo on U.S. chip trade with China.
Microns (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 Samsung (BC94.L) and SK Hynix, both based in South Korea. That means Micron, based in Idaho, is the only manufacturer in the United States.
While it has also had a stellar year, the risk of a ban in China also weighs heavily on the minds of company executives, as about a quarter of Micron’s revenue comes from the economic superpower. CEO Sanjay Mehrotra previously said about half of its revenue is at risk.
Intel watchers will wait until late 2024 to see if it can really close the gap with foreign rivals in 2nm chips, a type of technology that could power the next generation of smartphones, data centers and artificial intelligence.
The company calls its new chip Node 18A and is reportedly testing it at tech conferences, with an eye toward production beginning in late 2024. This launch date could make it the first chipmaker to integrate it into the next generation technology.
Even without this statement, the company’s stock price rose from $26.70 per share in early 2023 to $42.7 per share in December.
Arm was one of the most anticipated IPOs of 2023, but it has had a rocky start since its debut. This was partly because analysts questioned the company’s value as it grappled with uncertainty over how new accounting rules on revenue from large licensing deals can be recognized.
The company has said it is also looking 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 rise in its share price over the past year despite experiencing slower inventory depletion due to weak end-market demand in the middle of the year.
It was also anticipated that continued macroeconomic constraints and a shift in consumer spending would have acted as headwinds.
The company has been actively pursuing several routes to reduce costs, including expanding its automation efforts. Due to higher utility rates imposed by the Taiwan government, its utility costs are expected to have increased sequentially.
TSMC (TSM)
TSMC dominates the global processor market and revealed test results of its “N2,” or 2-nanometer, chip prototypes, to some of its biggest customers, including Apple (AAPL) and Nvidia, the Financial Times reported. TSMC had been offering the new technology at a discount in a bid to attract big-name customers, the sources said.
According to analysts at Zachs, Taiwan-based TSMC’s sales are estimated to fall 4.7% year over year. For the current and next fiscal years, estimates of $66.5 billion and $80.5 billion indicate changes of -12.4% and +21.1%, respectively.
Chip producer ASML has also been grappling with an industry slowdown and a ban on trade with China. In December there was a change in senior management that could mean hope for the future. CEO Peter Wennink will step down in April to make way for Christophe Fouquet, a chip industry veteran who is currently chief commercial officer.
ASML machines are vital to the production of next-generation chips at manufacturers such as Taiwan Semiconductor Manufacturing Company (2330.TW) and Samsung Electronics.
Shares have risen about 14% in the past year to value the Veldhoven-based company at around €250 billion.
Broadcom (AVGO)
Broadcom shares have risen in recent months after several analyst endorsements. Most recently, Citi gave a ‘Buy’ rating to the stock, which has gained more than 80% so far this year.
The company expects significant windfalls from increased processing power needed for AI, despite slowing sales and macroeconomic issues.
See: IPO outlook for 2024: There is a ‘huge backlog’, says bank executive
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