It’s a bad dream that slowly turned into a nightmare. And this nightmare doesn’t seem to want to end.
The year 2022 has been a painful journey for semiconductor manufacturers.
Modeled on Advanced Micro Devices (AMD), Nvidia (NVDA) and Intel (INTC), who are the three main players in the sector, 2022 is a year to forget. Your ratings are in recession.
AMD currently has a market value of $94.4 billion, a decrease of at least $83 billion compared to December 31, 2021. The company’s share price has fallen 59.4% over the period.
Nvidia, once in the top 10 most valuable companies in the world, was kicked out of that club. The chipmaker now ranks 21st as its market cap has shrunk by $431 billion. In fact, as of early 2022, Nvidia’s market value was roughly $732 billion. Now it’s just $301 billion. It’s a disaster for the company’s shareholders.
Lost $725 billion
As for Intel, the market value of the group of microprocessors has shrunk from $206.3 billion in January to $105.6 billion at the last review. Intel shares fell 49% during that period.
MicronTechnology (mu) valuation fell by $44 billion to $58.4 billion in just over nine months. For its part, the company’s stock fell 43%.
Finally Qualcomm (QCOM) recorded a market value of $135.8 billion, down more than $66 billion since January. The share price fell 33%.
Collectively, the semiconductor manufacturers whose chips power nearly all of our electronics, our computers, most vehicles, and the gigantic data centers of corporations, have collectively lost more than $725 billion in market value since January.
And this stock market bloodbath will continue if we are to believe what AMD just said.
The group released preliminary results for the quarter just ended on Oct. 7. Revenue is expected to be $5.6 billion, down significantly from the original guidance of $6.7 billion “plus or minus $200 million,” the company said in a release.
While that would be a 29% increase in revenue compared to the third quarter of 2021, AMD previously said it expects a revenue jump of around 55%.
“Preliminary results reflect lower than expected customer segment revenues reflecting lower processor shipments due to a weaker than expected PC market and significant inventory corrective actions across the PC supply chain,” AMD said.
Basically, the demand for PCs has slowed down sharply, which therefore affects microprocessor manufacturers such as AMD. It also seems to indicate that PC makers are finding themselves with large inventories.
AMD is also making slightly less money from its products as margins have been squeezed. Margin before interest, taxes, expenses and other income or non-GAAP is expected to be approximately 50%. The group had hoped it would be 54%.
politics
The company explains this disappointing figure by saying that the group had to adjust its prices in view of the reduced demand for processors and tried to liquidate its inventories, especially in the graphics business.
“The PC market weakened significantly during the quarter,” said AMD Chairman and CEO Dr. Lisa Su. “While our product portfolio remains very strong, macroeconomic conditions resulted in lower than expected PC demand and a significant inventory correction across the PC supply chain.”
Like the rest of the technology companies, semiconductor manufacturers are affected by recession fears, which are preventing companies and consumers from spending. This is the result of aggressive rate hikes by the Federal Reserve to quell inflation, which is at its highest level in over 40 years.
The sector is also suffering from the war over technology control between the United States and China. The Biden administration just issued new policies aimed at drying up Beijing’s supply of microchips used in advanced computing and military applications.
The Commerce Department has actually released two new rules preventing American manufacturers from selling their chips to blacklisted Chinese companies.
“UNTIL [Bureau of Industry and Security] Expands controls for transactions involving items for end-uses in supercomputer and semiconductor manufacturing, for example, this rule expands the scope of foreign-made items subject to licensing requirements for twenty-eight existing Entity List companies located in China The Biden administration announced that.