Back in June 2024, business media was prepping the market and public with optimism on the back of stellar performance of the Malaysian semiconductor industry. Maybank's blog report started with the opening line:
Amidst persistent geo-political tensions, Malaysia's semiconductor industry stands as a beacon of growth, poised to seize a substantial share of the global market, projected to reach a staggering USD$588 billion with a 13% growth trajectory this year.
A lecturer and Senior Manager for InvestPerak was all praises for the National Semiconductor Strategy announced by Dato Seri Anwar Ibrahim at an event that month.
However, off-late tech stocks have been taken a beating in the market on Wall Street and Bursa Malaysia since the Yen carry trade driven sell-off early in the month. For one, the incumbent darling semiconductor stocks, Intel having been on a reversal trend to the other rising semiconductor stocks.
The new darling, Nvidia have taken a tumble due to some anti-trust issues, a usual front for corporate battle in the US.
In addition, both Donald Trump and Kamala Harris are campaigning to revive manufacturing sector in the US to compliment the sanction strategy imposed on China. The globalisation promoted by Clinton and Obama doing a reverse due to geopolitics.
This could have an impact on Malaysia and the layoff by Intel Penang, though an Intel problem, is seen by certain business and stock investor as prequel to a pullout.
Few days ago, Trump threaten at imposing 100% tariff on countries involved in dedollarisation indirectly hitting at countries active in BRICS - members and associate by virtue of BRICS plus in which a new BRICS payment system seemed to be forthcoming.
The Star Online news on Intel:
Intel's Dow status under threat as struggling chipmaker's shares plunge
By Arsheeya Bajwa
Technology
Tuesday, 03 Sep 2024
(Reuters) -Intel was one of the first two tech companies to join the Dow Jones Industrial Average during the late-'90s dot-com boom, along with Microsoft. Now, a slump in Intel's share price could cost the American chipmaker its place in the blue-chip index.
Analysts and investors said Intel was likely to be removed from the Dow, pointing to a near 60% decline in the company's shares this year that has made it the worst performer on the index and left it with the lowest stock price on the price-weighted Dow.
The chipmaker's shares slid about 7% on Tuesday amid a broader market selloff, with the Philadelphia SE Semiconductor index down nearly 6%, following reports of lower chip sales globally in July.
A removal from the index will hurt Intel's already bruised reputation. The company has missed out on the artificial intelligence boom after passing on an OpenAI investment and losses are mounting at the contract manufacturing unit that the chipmaker has been building out in hopes of challenging TSMC.
To fund a turnaround, Intel suspended dividend and announced layoffs affecting 15% of its workforce during its earnings report last month. But some analysts and a former board member believe the moves might be too little, too late for the chipmaker.
"Intel being removed was likely a long time coming," said Ryan Detrick, chief market strategist at the Carson Group.
The latest results may be the final push needed to finally see the company removed from the Dow, Detrick added.
Total semiconductor sales globally fell 11.1% in July from June and were lower than the five and 10-year averages, largely due to lower memory chip sales, UBS Securities said.
"End-market demand is not favorable for Intel, as well as the missteps on their product roadmap," Summit Insights Group analyst Kinngai Chan said.
Meanwhile, Reuters reported over the weekend that Intel CEO Pat Gelsinger and key executives are expected to present a plan later this month to the company's board to slice off unnecessary businesses and revamp capital spending.
S&P Dow Jones Indices, which manages the Dow, declined to comment on whether Intel could be removed from the index.
Changes to the index are made as needed and the last update happened in February when struggling pharmacy chain Walgreens Boots Alliance was replaced by Amazon.com.
Stock price is a key element for inclusion in the Dow, unlike the S&P 500 index which takes into account market value.
The Dow's selection committee monitors whether the highest-priced stock in the index has a price more than 10 times that of the lowest. Currently, the highest weighted stock - UnitedHealth Group - is priced about 29 times higher than Intel.
The chipmaker is also the least influential member of the index with a meager 0.32% weightage based on its closing price of $20.13 on Aug. 29.
While the larger impact would be to Intel's reputation, the exclusion would further hit its shares, which are down more than 70% from a record high in August 2000, leaving the chipmaker with a market value below $100 billion for the first time in 30 years.
WHO WOULD REPLACE INTEL?
Nvidia could replace Intel on the Dow, according to Ryuta Makino, research analyst at Intel investor Gabelli Funds.
With shares up more than 160% this year, Nvidia has become one of the world's most valuable firms thanks to the essential role its chips play in powering generative AI. A stock split in May also increased the odds of its inclusion.
But some investors said Nvidia might be too volatile a stock for the Dow, which usually prefers more stable stocks.
Texas Instruments, a nearly century-old chipmaker with significant production capacity within the United States, is another option to replace Intel in the index, said Daniel Morgan, senior portfolio manager at Synovus Trust, which owns shares in Intel.
Texas Instruments' shares have risen more than 20% this year to $211.09 as of Thursday, which is closer to the Dow constituents' average price of about $209.
In the event of a removal, a stock with a price closer to the average price of the current list might be preferred as a replacement, said David Blitzer, who chaired the S&P Dow Jones Indices' Index Committee for more than two decades until 2019.
(Reporting by Arsheeya Bajwa and Harshita Mary Varghese in Bengaluru; Additional reporting by Akash Sriram; Editing by Shounak Dasgupta)
The impact of Intel business setback could be broad based. For one, it affected Broadcom, whose CEO is a Malaysian. In Malaysia, the supporting industry to Intel would be affected.
There have been reports claiming China have responded to ban Intel and AMD chips from their electronic products ahead of planned sanctions imposed by the US. They have been boasting of having made headway in R&D for photonic chips which could surpassed the capability of Nvidia chips.
The news on Nvidia from in Star Online:
Nvidia’s stock swoon turns attention to Big Tech’s sway over markets
By Lewis Krauskopf
Technology
Wednesday, 04 Sep 2024
NEW YORK (Reuters) - Shares of Nvidia and other Big Tech stocks have helped power the markets run to record highs this year. Their recent wobble is making investors nervous.
A tumble in the chipmaker’s shares shaved $279 billion off Nvidia’s market capitalization on Tuesday, the single largest one-day decline in market value on record for a U.S. company. The stock was rebounding on Wednesday, rising 1% in late morning trading.
Whether the steep fall is due to investors becoming more cautious towards the artificial intelligence trend that supercharged market returns this year or worries over the health of the U.S. economy, more trouble for Nvidia and other Big Tech stocks would likely spell trouble for the broader markets.
Nvidia - along with Apple, Microsoft, Amazon and Alphabet - currently make up more than a quarter of the weight in the S&P 500 and over a third of the Nasdaq 100. Nvidia alone had comprised 23% of the S&P 500’s year-to-date total return of 19.5% as of the end of August.
Further losses in their shares would likely hurt those indexes, which hit record highs in July, unless stocks in other sectors of the market pick up the slack.
"When you look at Nvidia as a market leader, it's not holding up despite very strong profits," said Jason Teh, chief investment officer of Vertium Asset Management in Sydney. "There's an old saying - if the troops can't follow the generals, it's a warning sign."
Nvidia's quarterly forecast last week failed to meet the lofty expectations of investors even as second quarter revenue and profit topped estimates.
"Those earnings last week were fine; they exceeded expectations," said Steve Sosnick, market strategist at Interactive Brokers. "But the magnitude of the beats is shrinking quarter by quarter and that’s not lost on investors."
Index funds that track the S&P 500, Nasdaq 100 and other benchmarks also stand to suffer if Nvidia slides, because of the stock's increasingly heavy weighting in these indexes. The chipmaker has even more sway in more narrow indexes and exchange traded funds that focus on technology and semiconductor shares.
Even with its recent slide, Nvidia shares have more than doubled in 2024, as of Tuesday's close, and the stock remains the best year-to-date performer in the S&P 500. Shares of the AI heavyweight are up a whopping 800% since October 2022.
Nvidia's ascent has helped drive the valuation of the broader S&P 500 technology sector higher, causing some concerns about a bubble in tech stocks. But the sector's forward price-to-earnings ratio remains well below levels reached in 2000, during the dot-com era.
(Reporting by Lewis Krauskopf; additional reporting by Tom Westbrook and Suzanne McGee; Editing by Ira Iosebashvili and Jonathan Oatis)
It turned out Nvidia is being sub-poena by the US Department of Justice for violating anti-trust law. [Read Yahoo here]. Its the usual front in the US corporate rivalry, but its not to be underestimated. Remember how giant Ma Bell got broken up by anti-trust law in 1982.
For Malaysia, it should not be resting on its laurel and get lost in the accolades. Thailand, Vietnam and Singapore are vying to be the regional leaders in semi-conductors.
Penang is looking ahead with a 50 year vision to reclaim the title as Silicon Valley of the East by moving up the value chain. But the Intel lay-off could be a setback. Can Malaysia's supply chain solidify its role in the evolving AI development?
Seriously hope, Chang Li Shih is right and not guessing that joining BRICS will not affect the country's E&E in view of desperate post-debate Trump doing a double down on his sanction threat to crush BRICS and penalise countries by-passing US dollar?
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