Major chip stocks are up in premarket trading this morning. Two of the biggest movers include Advanced Micro Devices, Inc. (ticker: AMD), which is currently up over 9%, and ASML Holding (ticker: ASML), which is up over 7% at the time of this writing. Here’s why each stock is surging this morning.
AMD—the next AI chip giant?
If there is one company that’s profited the most from the artificial intelligence wave that the tech industry has been riding for the past several years, it’s Nvidia. That’s because Nvidia is the leader in making the chips that power AI servers that run applications like ChatGPT.
If Cisco was the backbone of the internet in its early days, Nvidia is the backbone of the AI revolution now—a position that has been reflected in its stock price over the past year. Shares in Nvidia (ticker: NVDA) are up over 121% over the past 12 months.
While AMD is still a long way behind Nvidia when it comes to being an AI chip leader, the company’s latest earnings results, announced yesterday, showed that its AI chip business is accelerating. As The Verge noted, the company’s Instinct MI300 chip, which is used in high-end servers that power AI tasks, brought in over a billion dollars in revenue during Q2 2024 alone—an all-time high for the chip.
AMD’s AI chip helped the company post record data center revenue of $2.8 billion, which was up 115% year-over-year. AMD posted $5.8 billion in revenue for the quarter—up 9% year-over-year.
In short, AMD’s data center revenue results show that it’s not lacking for customers in the AI space, and its chips that power AI servers are more popular than they’ve ever been. Investors this morning see that as a good sign for AMD’s future.
Of course, AMD is still a long way off from dethroning Nvidia as AI chip king. But its Q2 earnings results suggest the company is one of the rising giants in the field.
ASML may get a China export reprieve
ASML Holding isn’t a chip company. However, the company manufactures the equipment chip companies need to make their products—and they have customers everywhere, including in China.
But China became a possible problem for ASML earlier this month when reports said the Biden Administration was considering possible export controls on companies that provided chip manufacturing equipment to China.
Now, however, Reuters is reporting that the Biden Administration is likely to issue an exemption to companies based in U.S.-allied nations. ASML is based in the Netherlands, a strong U.S. ally.
This would mean that ASML could still sell its equipment to its Chinese customers as planned. If the reprieve happens, it’s a major break for ASML. As Reuters notes, around 20% of its current order backlog is destined for Chinese customers.
Nvidia and TSMC
In addition to AMD and ASML shares surging this morning, other major tech stocks including Nvidia (ticker: NVDA) and Taiwan Semiconductor Manufacturing Company (ticker: TSM) are also up in premarket trading. NVDA shares are up about 6% and TSM shares are up over 4% as of the time of this writing.
While Nvidia and TSMC didn’t have any major news affecting either company today, many investors tend to group chip stocks together in the same basket. In this way, the good or bad fortunes of some companies that operate in the same space can affect investor sentiment about other similar companies.
In this way, AMD’s good Q2 earnings and ASML’s reported reprieve seem to have acted as a rising tide that lifts all boats this morning.