The semiconductor industry is preparing for increased volatility due to a recent directive from the US government to Taiwan Semiconductor Manufacturing Co (TSMC) to halt shipments of advanced chips to mainland Chinese customers.
This order specifically targets chips with designs of 7 nanometers or more, which are crucial for artificial intelligence (AI) applications.
TSMC's stock has already been impacted, with a 0.5% decline in Taipei trading.
This move follows previous chip-related export controls implemented by the US Department of Commerce in October 2022.
The semiconductor sector is expected to experience heightened volatility as investors await further details on the implications of these measures.
Despite these challenges, analysts maintain a positive outlook on the sector, particularly for firms with strong fundamentals and exposure to the AI growth narrative.
Major tech companies continue to invest heavily in AI, which is expected to benefit semiconductor firms specializing in GPUs, custom chips, and high bandwidth memory.
As the semiconductor sector faces potential disruptions from US export controls, investors are advised to prepare for heightened volatility and consider structured strategies to gradually build long-term allocations in this space.