Shares of semiconductor giants fell during October 10 trading session as new US rules on restricting China chip shipments came out. These new, sweeping restrictions are more in line with previous media reports on export controls, with a great focus on new licenses for technologies that could have military use.
With the new restrictions, chip manufacturers could see a material impact on their businesses, which is now being reflected in the markets. However, despite the new export restrictions, Mizuho Securities’ Vijay Rakesh joined CNBC’s Squawk on the Street, where he pointed out that there could be some winners.
“What we think is happening is obviously the memory guys Micron (NASDAQ: MU) and Western Digital (NASDAQ: WDC), could be winners in the longer term, not the short-term. And if you look at the near-term headwinds, that would be obviously for the semi-cap equipment OEMs like Lam Research (NASDAQ: LRCX) is where we see the biggest impact.”
He also added:
“As you saw in the restrictions, they were also targeting some of the supercomputers and the AI GPU side. The supercomputer is obviously an escalation over the AI GPU side, and we think some of the CPU suppliers, AMD (NASDAQ: AMD), etc., probably also start to get impacted.”
Potential for a supply shock
Meanwhile, Vivek Ramaswamy of Strive asset management joined CNBC’s Squawk Box to break down what the new export restrictions could mean on the macro level for China, indicating that a move on Taiwan would mean a supply shock and market volatility.
“I think this is a supply shock waiting to happen. The majority market share, majority production of advanced semiconductors come from TSMC (Taiwan Semiconductor). Not a lot of people know this, this is the largest company in Asia by market capitalization. It is one of the top 20 companies by market capitalization, this is a sleeping giant in Taiwan.”
“If China controls Taiwan, and by the way, there are scenarios, where in a war scenario, the production could go out entirely, lights could go out in that factory. But even if China took it over peacefully, China dictates the terms of transfer. Now what I think China is playing for here is part of a longer grand bargain.”
Market participants seem to be stuck between a rock and a hard place, with inflation and war in Ukraine already pushing risk assets down, the new export restrictions the US imposed could further dampen investing enthusiasm.
While on the micro, some companies could come out as winners, on the macro scale, worries of aggressive China moves toward Taiwan could spell more trouble for already exhausted markets.
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