Semiconductor manufacturers are at the forefront of the technological battle, especially in the context of China’s rapid tech developments. One would have thought President Trump would take it easy on the chipmakers owing to their critical position in the US and global tech infrastructure.
However, investors are now finding out that semi stocks aren’t immune to tariffs, with the latest round of tariffs expected to cost manufacturers around $1 billion. This cost will be incurred through lost sales, increased regulatory compliance, and elevated supply chain costs.
Uncertainty regarding the exact details of the tariffs continues to cause chaos in the market. Chip stocks are sliding as the leading chipmaker, led by Jensen Huang, finds its H20 chips banned from export to China. As the leading chipmaker tries to steer its way out of the crisis, other companies that rely on this giant for business are also trying to figure out what to do.
We decided to take a look at such stocks and see if they offer value. Remember that the H20 chips were made specifically for China, and a ban on selling them is only a temporary headwind, not something that threatens the company’s moat.
To come up with the list of semiconductor stocks worth buying on the China H20 chip sale ban, we considered stocks that are an integral part of the semiconductor supply chain and ranked them by hedge fund interest in their stocks.
10. ASE Technology Holding Co., Ltd. (NYSE:ASX)
Number of Hedge Fund Holders: 17
ASE Technology specializes in semiconductor packaging and testing while also offering electronic manufacturing services. Irrespective of the tariff impact, ASX has a crucial place in the semiconductor supply chain. The company’s job is to ensure chips are of the highest standard, so as long as the broader industry continues making chips, ASX will have enough business.
We have already seen this with the company’s Q1 revenue, which is up 6.5% YoY. March revenues were up 13.1% YoY. This is in contrast to the guidance the company gave in February, suggesting things are not as bad as the market suggests. Even though Q1 margins are expected to remain under pressure, this should also recover in the latter half of the year.
Like many other semiconductor companies, there are concerns over the company’s business with China. However, the management is expected to resolve these issues as it is already in discussion with its business partners as well as the government to determine the best way forward.
9. Amkor Technology, Inc. (NASDAQ:AMKR)
Number of Hedge Fund Holders: 29
Amkor Technology, Inc. is an outsourced semiconductor packaging and test services provider. The company provides flip-chip scale package products, flip-chip stacked chip scale packages, memory products, flip-chip ball grid array packages, and turnkey packaging and test services.
The company’s stock was doing a good job of recovering to the March levels, but the news of H20 chips sales restriction means investors now have to worry about the downtrend continuing. This, however, presents an opportunity for value investors. The company has a highest analyst target price of $36, more than double from current levels.
As per the company’s future outlook announced at the recent earnings call, the revenue growth was expected to be flat to low single-digit. With the help of content recovery in new iOS phones, stronger revenue growth was projected in the second half of the year. With the next earnings report set to come out later this month, investors will need to keep a close eye on how that guidance is affected.