After a rocky start to the year, semiconductor stocks are turning around in a big way on Monday.
During the first week of 2024, some of the world's most famous semiconductor companies -- Taiwan Semiconductor Manufacturing Company (TSM 1.26%), Intel (INTC -9.20%), and Advanced Micro Devices (AMD 2.37%) -- declined in the wake of December's Santa Claus rally.
As the stock market started to find its footing in the second week, however, shares of all three of these companies flipped from sinking to rising. As of 12:05 p.m. ET, TSMC shares were up 2.9%, Intel stock was up a solid 3.4%, and AMD was doing the best of all with a 5.1% gain.
You can probably thank President Joe Biden for that.
Bad news for China is good news for everyone else
By now, you've certainly heard about the Biden administration's plans to curtail China's access to some of the most advanced chips available to support artificial intelligence functions. That section of the market is dominated by Nvidia (NVDA 6.18%), which has been feeling the lion's share of the impact from export restrictions on those types of chips. Other companies have been little affected.
However, The Wall Street Journal reported Monday morning that the Biden administration is now shifting its attention to less advanced, older-generation computer chips used in industries other than AI -- in consumer electronics, military weapons, and cars, for example. These kinds of semiconductor chips are more likely to be produced in and exported from China rather than imported into China. Indeed, as the WSJ article highlights, China is downright dominant in this segment of the semiconductor industry -- and President Biden wants to do something about that.
Meanwhile, worrying that China might leverage its dominant position in lower-end chips to punish the U.S. in a future trade war, Congress has been urging the Commerce Department and U.S. Trade Representative (USTR) to take steps to protect the supply chain for these chips by awarding subsidies to expand domestic semiconductor production on the one hand and imposing tariffs on chips imported from China on the other.
What this means for Intel, Taiwan Semi, and AMD
This effort is still in its early days, but already, the WSJ notes that the Commerce Department has awarded $162 million in subsidies to help Microchip Technology expand production of microcontrollers for cars and appliances. The Commerce Department is also said to be putting together a list of other U.S. companies that might receive government support to counter China's rapidly growing industry producing lower-end chips.
Don't get too excited just yet. While Intel, Taiwan Semi, and AMD stocks are all rising on Monday's news, there's no guarantee that any of these companies will end up getting subsidies directly aimed at supporting their lower-end chip production. To the contrary, semiconductor companies like Marvell, Texas Instruments, and Microchip all spring to mind more readily when one thinks of lower-end chips. And all of those stocks are rising Monday, too.
That said, if you did want to place a bet on one of the high-profile chipmakers named above based on this newest effort to subsidize domestic chip production, Taiwan Semiconductor looks like the safest bet to make. Trading at less than 16 times forward earnings, it's significantly cheaper than Intel at 26 times forward earnings -- and less than half the price of AMD at 37 times forward earnings. TSMC is also trading at a cheaper valuation than Marvell, TI, or Microchip.
Strange as it may be to say it, Taiwan Semiconductor may end up being the biggest beneficiary of all if the U.S. trade war in semiconductor chips continues.
