Chip stocks in Asia had sold-off earlier in Thursday after a report that the US was considering tighter curbs on exports of advanced chip technology to China
Trading in U.S. chip stocks was choppy on Thursday with the Philadelphia semiconductor index closing higher after dropping on Wednesday with biggest contributions from Nvidia and Broadcom.
Chip stocks in Asia had sold-off earlier in Thursday after a report that the US was considering tighter curbs on exports of advanced chip technology to China.
Bloomberg News had reported that U.S. President Joe Biden’s administration was considering a measure called the foreign direct product rule that would allow the U.S. to stop a product from being sold if it was made using American technology.
After the report the Global X Asia Semiconductor ETF closed 1.74% lower on Thursday with declines in major holdings including SK Hynix, Tokyo Electron, Taiwan Semiconductor Manufacturing Co, and Samsung Electronics.
The Philadelphia Semiconductor index had dropped 6.8% on Wednesday for its weakest day since March 2020. The index had opened up 1.7% on Thursday before dropping more than 1% at its low for the day and then ending the session 0.5% higher. Its biggest boosts were from Broadcom, up 2.9%, and Nvidia up 2.6%.
Their advances helped offset declines in stocks such as Advanced Micro Devices, which closed 2.2% lower after dropping more than 10% on Wednesday, in its biggest sell-off since October 2022.
Some analysts cited Wednesday’s sell-off as a signal to bargain hunt. Vedvati Shrotre at Evercore ISI wrote that the near-term probability the trade curbs would be implemented is low and pointed to “near-term weakness as a unique buying opportunity.” Also Vivek Arya at Bank of America cited current volatility as enhanced opportunity in firms with best-profitability.
But Daniel Morgan, portfolio manager at Synovus Trust expects more volatility ahead with chip firm earnings due in coming weeks and both U.S. Presidential candidates, Donald Trump and Joe Biden, “taking a tough line” on trade.
What you were seeing is buying on the weakness and then investors coming to the awareness that this is going to be a recurring concern as we head into the reporting season, that firms with a high level of sales exposure to China may be hurt, according to Atlanta, Georgia based Morgan.
He pointed to an almost 11% drop in shares of ASML on Wednesday to illustrate concerns about chip firms that disclose big exposure to China. Investors overlooked strong results at ASML, the biggest supplier of computer chip- making equipment, because nearly half its sales came from China.
But he noted that investors were equally concerned about Trump implementing tariffs when he was President yet chip firms have survived and have done extremely well since then.
