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AMAT’s P/E is 13 and all we ever hear is of chip shortages. If AMAT is, as most perceive, a leading producer of chip making equipment, then how can it be that the price will remain relatively low? Isn’t it more or less inevitable that demand for it’s chip-making equipment will rise for many years to come? This, of course, hinges on it keeping it’s positioning as a leading producer, which I don’t see as at risk. Thanks for your thoughts.
The slowdown in spending will impact AMAT et al in the short term. My guess, a few years down the road this will look like a blip.
Why?
The major trends driving chip consumption are enormous and they aren't abating. There may be a pause in some segments (gaming, PC) and the cost of the Ukraine war is hurting spending all over Europe (gotta buy energy, which means less $$ to buy the next phone). But autonomous driving is just getting started. Computational medicine, just getting started. Smart grids, just getting started. Remote surgeries, just getting started. And other markets, from phones to communications infrastructure to military will all grow from here.
The demand snapshot is soft, the longer term outlook is massive. There is, though, one major risk: China/Taiwan. If that blows up, a whole lotta things will go very badly, very quickly.
The bill, popularly known as the CHIPS-Plus package, has three major incentives for chipmakers: $52 billion of assistance in setting up fabs and manufacturing units, which also includes $2 billion for legacy chipmaking essential to the auto and defense industry; 25% in tax relief for investment in local semiconductor manufacturing at roughly $24 billion; and $200 billion grant for research in the area.