In this article, we will be taking a look at the US-China semiconductor war: 10 stocks to watch. To skip 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: 5 Stocks to Watch.
The United States and China have been on opposing ends in an ongoing tech cold war for several years now. This war is arguably far from its end, as trade tech tensions continue to rise between the two countries, to the dismay of the semiconductor industry caught in the fray. With such an impending threat to the industry, companies on both sides of the tech cold war have been looking for ways to control the damage done.
Many semiconductor companies that have traditionally been doing well on the market are being impacted by the US-China semiconductor war. Notable names include Micron Technology, Inc. (NASDAQ:MU), Intel Corporation (NASDAQ:INTC), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), among many more, as the article below will show. To help strengthen the position of American semiconductor companies, the Biden administration has taken steps to support local chipmakers. This August, the government signed the CHIPS and Science Act, which is aiming to strengthen the American semiconductor industry.
The act is expected to get American semiconductor companies back on their feet, since US-made chip production fell to 12% last year, according to Bloomberg. American Commerce Secretary Gina Raimondo has also moved to deploy over $52 billion for research and development, alongside manufacturing and workforce development, which is expected to further strengthen the semiconductor industry. On the topic of the new federal funding for the industry, Raimondo commented that the funds are expected to multiply as companies use government subsidies to attract private-sector money. She hopes to bring in an additional $200 billion to $400 billion through this project. The totality of the funds amassed to aid the American semiconductor sector is expected to last until 2026.
According to Reuters, further development on the semiconductor war front includes the Biden administration's imposition of broadened restrictions on US shipments to China, especially targeting those holding semiconductors used for artificial intelligence and chipmaking tools. Several American semiconductor companies have already been instructed to halt their shipments to China, with NVIDIA Corporation (NASDAQ:NVDA) being one of the impacted companies. It has also been mentioned that the new regulations, to go fully into effect in October at the earliest, would include additional actions against China as well. American chip-makers are also expected to be disproportionately impacted as they will begin to face greater and stricter restrictions in the semiconductor space. Primarily, however, the new rules and restrictions are expected to impact companies that are trying to challenge the dominance of other companies like NVIDIA Corporation (NASDAQ:NVDA) in the AI chips sector.
Photo by Yogesh Phuyal on Unsplash
These stocks are likely to be impacted by the rivalry in the semiconductor industry, between the US and China, in either a positive or a negative manner. We have mentioned analyst ratings and price targets for all the stocks listed, alongside other fundamentals such as their latest earnings results, projected EPS growth, past dividend growth history, and more.
US-China Semiconductor War: Stocks to Watch
10. Hua Hong Semiconductor Limited (HKG:1347)
Number of Hedge Fund Holders: N/A
Hua Hong Semiconductor Limited (HKG:1347) is an investment holding company that manufactures and sells semiconductor products. The company offers embedded non-volatile memory, standard logic and mixed signal, radio frequency, power management integrated circuits, power discrete, and automotive solutions. It is based in Shanghai, China.
This August, Hua Hong Semiconductor Limited (HKG:1347) advanced by 5% despite rising US-China tensions. The company is expected to benefit from Chinese support for homegrown firms to bolster key semiconductor technology. As such, Sino-American tensions are positively impacting Hua Hong Semiconductor Limited (HKG:1347).
Hua Hong Semiconductor Limited (HKG:1347), like Micron Technology, Inc. (NASDAQ:MU), Intel Corporation (NASDAQ:INTC), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), is a renowned semiconductor company. In light of the US-China semiconductor war, the stock is likely to be significantly impacted.
9. Semiconductor Manufacturing Int'l (NYSE:SMI)
Number of Hedge Fund Holders: N/A
Semiconductor Manufacturing Int'l (NYSE:SMI) is China's largest chipmaker based on market value. The company is based in Shanghai, China. It focuses on computer-aided design, manufacture, testing packaging, and trading of integrated circuits.
Semiconductor Manufacturing Int'l (NYSE:SMI) will have to face US export curbs this year, but the stock still continued rising in August. With traders banking on Chinese support for local semiconductor companies, the stock was able to gain 3.3% in Hong Kong this August.
8. MagnaChip Semiconductor Corporation (NYSE:MX)
Number of Hedge Fund Holders: 27
MagnaChip Semiconductor Corporation (NYSE:MX) is an information technology company working to design, manufacture, and supply analog and mixed-signal semiconductor platform solutions. The company also provides display solutions and timing controllers covering a range of flat panel displays used in mobile communications. It is based in Luxembourg City, Luxembourg.
This September, MagnaChip Semiconductor Corporation (NYSE:MX) announced that it is expanding its stock repurchase program to $87.5 million, compared to the previous figure of $75 million. The company has already purchased $37.5 million worth of shares under this buyback program. The expansion makes a stronger statement about the company's desire to return shareholder money as well. In light of rising tensions between the US and China in the semiconductor sector, MagnaChip Semiconductor Corporation's (NYSE:MX) acquisition by Wise Road Capital was halted. The acquisition was valued at $1.4 billion, but was interrupted by the Committee on Foreign Investment in the United States (CFIUS)
Toronado Partners was the largest stakeholder in MagnaChip Semiconductor Corporation (NYSE:MX) in the second quarter, holding 2.6 million shares worth over $37.3 million. In total, 27 hedge funds were long the stock, with a total stake value of $210 million.
Altron Capital Management, an investment management firm, mentioned MagnaChip Semiconductor Corporation (NYSE:MX) in its fourth quarter 2021 investor letter. Here's what the firm said:
“MagnaChip Semiconductor Corp. (NYSE:MX). While the previous buyout offer from Wise Road Capital did not go through as many expected, the company is still in talks with other potential buyers. Furthermore, the company announced a USD 75 million share buyback, which represents a significant percentage of the company’s shares. While we do not generally enter positions with the anticipation of a buyout, it is the case that a MagnaChip acquisition will be the most likely outcome.”
7. Dell Technologies Inc. (NYSE:DELL)
Number of Hedge Fund Holders: 49
Dell Technologies Inc. (NYSE:DELL), another information technology company, is based in Round Rock, Texas. The company develops, manufactures, and sells IT solutions, products, and services across the globe.
On August 26, Analyst Amit Daryanani at Evercore ISI reiterated an Outperform rating on Dell Technologies Inc. (NYSE:DELL) shares. The analyst also placed a $58 price target on the stock.
This September, news broke that the Biden administration is planning to broaden curbs on US shipments of semiconductors to China. The move is coming in light of the rising rivalry between the two countries. The new restrictions are likely to impose license requirements on chip shipments to China, which is likely to impact Dell Technologies Inc. (NYSE:DELL). The company is known for making data center servers containing the Nvidia A100 chip. As such, Dell Technologies Inc.'s (NYSE:DELL) product shipments are likely to become more restricted, in a negative turn of events for the company.
Dell Technologies Inc. (NYSE:DELL) was found among the 13F holdings of 49 hedge funds in the second quarter. Their total stake value was $1.1 billion. In comparison, 59 hedge funds were long the stock in the previous quarter, with a total stake value of $1.9 billion.
6. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 65
Intel Corporation (NASDAQ:INTC) designs, manufactures, and sells computer products and technologies across the globe. It provides platform products like central processing units and chipsets, among more. It is based in Santa Clara, California.
Ross Seymore at Deutsche Bank has a Hold rating on shares of Intel Corporation (NASDAQ:INTC) as of September 8. The analyst also placed a $35 price target on the stock.
This August, with the Taiwan visit led by the US House of Representatives' Nancy Pelosi, tensions between the US and China substantially increased. Semiconductor stocks across the globe felt the impact of the move, with Intel Corporation (NASDAQ:INTC), alongside several other American chip stocks, falling by more than 1% after the visit. This September however, news from the American Commerce Secretary, Gina Raimondo, revealed that about $52.7 billion might be deployed for research, development, and manufacturing in the semiconductor space. The additional funding is expected to aid companies like Intel Corporation (NASDAQ:INTC) significantly.
There were 65 hedge funds long Intel Corporation (NASDAQ:INTC) in the second quarter, with a total stake value of $2.5 billion. Of these funds, Generation Investment Management was the largest stakeholder in the company, holding 14.8 million shares worth $552.6 million.
Baron Funds, an asset management company, mentioned Intel Corporation (NASDAQ:INTC) in its second quarter 2022 investor letter. Here's what they said:
“Then, there is the case of Intel Corporation (NASDAQ:INTC). A blue-chip tech champion with a market capitalization of over $500 billion in early 2000, the stock was trading at a P/E multiple of 42. It was a fast-growing company whose stock price and multiple declined more or less in line with its peers. However, unlike Google, Intel’s net income has grown from $7.3 billion in 1999 to $19.9 billion in 2021, a compounded annual growth rate of just 4.7%. Its growth from the dot com era has not proven to be durable, and Intel has yet to trade at the price it attained in 1999.”
Intel Corporation (NASDAQ:INTC), like Micron Technology, Inc. (NASDAQ:MU), Intel Corporation (NASDAQ:INTC), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), is one of the most popular semiconductor stocks hedge funds are piling into this year.
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Disclosure: None. US-China Semiconductor War: 10 Stocks to Watch is originally published on Insider Monkey.