The demand for federal subsidies to boost advanced semiconductor production in the U.S. has significantly exceeded available funds, with companies requesting over $70 billion, double the $39 billion allocated.
Leading chipmakers, including Nvidia Corp (NASDAQ: NVDA) and Advanced Micro Devices, Inc (NASDAQ: AMD), have earned breakthroughs in AI technology chips courtesy of the U.S. and global Big Tech companies splurging on expanding their AI moat. Analysts tout the chip designers as the key AI beneficiaries.
Commerce Secretary Gina Raimondo highlighted this surge in interest, emphasizing the government's role in revitalizing the nation's semiconductor manufacturing to mitigate reliance on foreign chip production.
Currently, the U.S. only produces 12% of global chips, a figure the subsidies aim to increase by incentivizing domestic production to strengthen the U.S. supply chain, the New York Times reports.
The urgency for expanding domestic chip production is further amplified by the rise of artificial intelligence, deemed a pivotal technology of the era by Raimondo.
Citi analyst Christopher Danely AMD and Nvidia are amongst his top AI picks. He expects broader semiconductor revenue growth of at least 11% YoY in 2024, given that units, declined 19% in 2023, the most significant decline since 2001.
AMD is entering the AI accelerator market with its MI300 chip, eying a market likely to surpass $400 billion within the next four years.
The company holds a positive outlook for its MI300X chip, predicting revenues to top its anticipated $2 billion in 2024.
AMD believes it can challenge Nvidia in the inferencing sector, attributing its confidence to its extensive high-bandwidth memory (HBM) capacity.
Moreover, AMD foresees further growth in its server CPU market share, supported by its collaboration with Taiwan Semiconductor Manufacturing Co (NYSE: TSM).
U.S. received over 600 expressions of interest, indicating a broad industry desire to enhance U.S. semiconductor capabilities, particularly in leading-edge technology predominantly produced in Taiwan.
The CHIPS Act, facilitating this subsidy program, aims to expand manufacturing capacity and includes provisions for $11 billion in research funding to pioneer new chip technologies.
This technology is crucial for various sectors, including AI and military hardware. The focus is on allocating approximately $28 billion towards developing these high-tech chips, a move aimed at increasing the U.S.'s share of global advanced chip production from virtually none to around 20% by the decade's end.
AMD stock has gained 27% year-to-date, reaching a market cap of over $284 billion. Nvidia gained over 64%.
Amid Nvidia's significant stock price increase, concerns about its sustainability have emerged. Fund managers suggested a potential bubble, casting doubt on the stock's ability to maintain its current valuation.
Experts like Josh Brown and influential investors like Cathie Wood express caution, indicating a belief that the market, with Nvidia as a prime example, may have reached its peak for the year.
Price Action: AMD shares traded higher by 0.60% at $177.07 on the last check Tuesday.