Supply Chain Improvements and Tech Giants' Plans Spark Optimism, Propelling Chip Stock Gains

On Monday, semiconductor stocks markedly recovered after a challenging start to the year.

Following December's Santa Claus surge, several of the most well-known semiconductor businesses in the world had their stock decrease during the first week of 2024. These companies include Taiwan Semiconductor Manufacturing Company, Intel, and Advanced Micro Devices.

But in the second week, when the stock market began to stabilize, shares of all three of these businesses turned from declining to increasing as of 05:05 p.m. ET, shares of TSMC were up 2.9%, Intel was up a strong 3.4%, and AMD was outperforming the others with a 5.1% gain.

The Biden administration's intentions to limit China's access to some of the newest processors available for AI applications. The market leader in that segment, Nvidia (NASDAQ: NVDA), has been most negatively impacted by export limitations on certain kinds of chips. Little has changed for other firms.

The Biden administration is now focusing on less sophisticated, older-generation computer processors used in areas other than artificial intelligence (AI), such as consumer electronics, military hardware, and automobiles, according to a Wall Street Journal story published on Monday morning. It is more likely that China will develop and export these types of semiconductor chips than that it will import them. President Biden wants to take action to counter China's clear dominance in this area of the semiconductor business, as the WSJ story points out.

Congressional Actions to Safeguard Semiconductor Supply Chain

Amid concerns that China may use its hegemony in low-cost semiconductors to exact revenge on the United States in a potential trade conflict, Congress has been pressuring the Commerce Department and U.S. Trade Representative (USTR) to take action to safeguard the chips' supply chain by enforcing tariffs on chips imported from China and providing subsidies to increase homegrown semiconductor manufacture.

The WSJ reports that although this initiative is still in its early stages, the Commerce Department has already granted $162 million in subsidies to support Microchip Technology in growing its manufacture of microcontrollers for automobiles and appliances. It is also reported that the Commerce Department is compiling a list of more American businesses that might be eligible for government assistance in order to compete with China's quickly expanding lower-end chip manufacturing sector.

The revelation caused the stocks of Intel, Taiwan Semiconductor, and AMD to rise, but there's no assurance that any of these firms would get subsidies specifically meant to boost the manufacturing of lower-end chips. On the othear hand, when one thinks about lower-end processors, semiconductor firms like Marvell, Texas Instruments, and Microchip all come to miinsnd more easily. Additionally, on Monday, all of those stock are increasing.