Nvidia's (NVDA 1.08%) Global Technology Conference 2024 (GTC 2024) kicked off on Monday, full of "sizzle and substance" (said Bank of America), but also offering "no big surprises" (according to Morgan Stanley). Investors who had been hoping for more are selling off Nvidia stock modestly today -- down 2.2% through 11 a.m. ET -- on Tuesday morning. And they're not the only ones selling.
Taiwan Semiconductor Manufacturing (TSM +0.34%) stock is also down 2.2% today, and Intel's (INTC +0.85%) off 2.6%. Micron (MU 0.03%), which has been bundling its high bandwidth memory chips along with the artificial intelligence (AI) chips that Nvidia is selling, is suffering a 1.5% sell-off, as well.
There may be two reasons for this.
NASDAQ: INTC
Key Data Points
Everything AI starts with Nvidia
Nvidia has turned into the standard bearer and industry leader in AI chips, so let's start there.
As TheFly.com reports, Nvidia offered up a "slew of product and partner announcements" last night and laid out plans for expanding AI's role in services, robotics, and the omniverse (the artist formerly known as the metaverse). What Nvidia didn't do, however -- and what investors apparently were hoping it would do -- is update its assessment of the size of the total addressable market (TAM) for AI chips. That means no new increase in the potential sales of Nvidia chips worldwide -- but also no increase in the TAM for Taiwan Semiconductor, Intel, or Micron, either (at least according to Nvidia).
This is probably the first reason semiconductor stocks are having a bad Tuesday morning. But the second reason may be related.
What's the matter with Arizona?
In the cases of Intel and Taiwan Semiconductor, there's a second reason for investors to be concerned. As Nikkei Asia reports today, five suppliers to Intel and TSMC have delayed construction of their own facilities in Arizona, which were intended to support the construction of new semiconductor plants there from Intel and TSMC.
Suppliers LCY Chemical, Solvay, Chang Chun Group, KPPC Advanced Chemicals, and Topco Scientific are blaming the high cost of construction, labor, and finding workers to build their plants for the postponements -- as well as Intel and TSMC themselves slow-rolling development of their own Arizona plants. TSMC, for example, has postponed the start of mass production at its Arizona plant from 2024 to 2025.
How bad is this news for Intel, Taiwan Semiconductor Company, and Micron? Taken in conjunction with Nvidia's lack of raising its estimate of AI TAM, it sounds a bit concerning for Intel and TSMC. And at least one of the suppliers -- LCY Chemical -- is also a supplier to Micron and its high bandwidth memory chips.
Still, I wouldn't worry too much about today's semiconductor sell-off. For one thing, a $1 trillion TAM for AI chips is still pretty darn large. And as big as Nvidia is, it still sold less than $61 billion in all sorts of chips last year.
Plus, according to Nikkei, it's faster to build chemical supply plants for chipmakers than for the semiconductor manufacturing plants they service. If demand for AI chips grows as expected, and Intel and TSMC get back on schedule building their Arizona plants, the suppliers could still probably finish their own plants in time to supply them before operations commence.
While today's news bears watching in case things get worse, I don't see it posing a huge risk to semiconductor stocks over the long term.
