At the end of last week, the market was shocked by the news that the American manufacturer EVGA will completely stop the production of graphics cards. At the same time, they accounted for four-fifths of his business. The official reason is said to be long-term disagreements with Nvidia, the maker of the cards’ most important components – the graphics chips – which kept the prices of the new chips secret until the last minute and set price limits for manufacturers. of cards.
But that alone doesn’t seem like a sufficient explanation after years of collaboration and marketing support from Nvidia and suggests we’re just looking at the tip of the iceberg. All this, moreover, at a time when the new generation of graphics chips are literally out of doors and card manufacturers have lost a significant portion of their customers in the form of ethereum miner.
The developments of the actions will say a lot. Shares of the largest graphics and computer chip maker, Intel, have fallen to the level of 2016 and are currently losing 41% year on year. Number two in the market in terms of the total number of graphics cards sold – Nvidia – is slightly better. It remains less than double the pre-pandemic numbers and continues to lose 54% year on year. AMD, the pond’s third largest pike, is slightly more than double the stock pandemic’s end, losing 46.7% year to date.
However, stock performance is not an eloquent metric and this year it hasn’t been very kind to stocks in general, and to tech stocks in particular. For comparison: The S&P 500 index, which reflects the state of the entire US economy, has experienced a much smaller year-on-year decline of about eighteen percent. So let’s take a look at what specifically concerns the graphics chip market, which today make up a substantial part of the semiconductor market, which was worth nearly $ 100 billion last year.
Both AMD and Nvidia were among the most undervalued semiconductor stocks on the US exchange in September, along with TSM (Taiwan Semiconductor Manufacturing Company). Anyway Nvidia cheap attracted recently and Cathie Wood, who bought 400,000 shares of the company.
But the general skepticism of investors has a reason. While the semiconductor market as a whole is still grappling with the bottleneck of missing select components, the shortage of graphics chips that plagued us during the pandemic has morphed into its opposite – they’re starting to linger and build up in warehouses. of sellers, thereby withholding their further orders.
For example, if you order some more sophisticated networking components nowadays, you will almost certainly encounter unusually high prices and delivery times of several months. There are still objective reasons for this. For example, according to the United States Bureau of Labor Statistics, the cost of imported semiconductors in the United States increased 8% year-over-year in July.
In addition to the old problems, new ones have been added this year, for example in the form of a shortage of supplies of neon and palladium. While the first was mined on a large scale in Ukraine – before the war, 45 to 50 percent of world production for the semiconductor industry came from there -, before the conflict, Russia was just as important a source of high quality palladium. However, the exact impact of the loss of low-cost sources of both raw materials is difficult to simply quantify.
To make matters worse, the US is attempting an experiment in the form of a new law known as the Chips Act. The latter is tasked with spending $ 52 billion as an incentive to develop the semiconductor industry and build factories. of semiconductors in the United States, thus stirring the waters of the free market.
After all, the Chips Act is not the only US intervention in the free market of the semiconductor industry, and particularly in the graphics chip market. Nvidia will explicitly touch i regulation from the beginning of September, which prohibits it from exporting advanced A100 and H100 GPU chips for machine learning and artificial intelligence to China, Hong Kong and Russia. However, at least a limited license has been granted for sale until next September. AMD finds itself in a similar situation with its MI100 and MI200 chips.
