Envidia Israel employees mark 100 days in captivity and call for the return of the abductees from captivity in Gaza./Envidia Israel.
The flare-up of global tensions between East and West harbors within it a struggle for control of the chip industry, when the chip has become the coveted trophy of the superpowers.
The US is jealously guarding the production of the chips while the Chinese work diligently to loosen the chains of their dependence on the Americans on the issue, and strive to achieve independence in the field. The
recent geopolitical conflicts between Ukraine and Russia and between Israel and the Iranian axis of evil have added combustible materials to the friction between the polar powers, and alongside the accelerated AI revolution the fight based on the control over the chips, and the investors turning away towards the shares of the sector.
The shares of the 6 largest chip companies on Wall Street, for example, have risen by an average of about 42% since last October 7th and about 64% since the Russia-Ukraine war broke out on the 24th to February 2022. Excluding the Intel share (reference below), the increase in the other 5 companies' shares jumps to about 79% for the period, this compared to an increase of about 14% in the NASDAQ index since February 24 and about 16% since October 7 And compared to an increase of about 13% and about 15% in the S&P500 index for the same periods respectively.
The largest of them all is the company Nvidia, among other things as a result of its purchase in 2020 of the Israeli Mellanox for about 7 billion dollars, whose stock jumped about 205% for the period examined since February 2022. In contrast, Intel showed a decrease of about 10.4% for the same period.
chip.
"Vehicles, smart home products, smart phones - everything is based on chips"/Valens Semiconductor
Although Israel no longer has chip manufacturers, the shares of the 4 Israeli companies that supply them with equipment are also benefiting from the pursuit of the chip and have risen by about 34% on average since February 2022 - some less and some more, and by about 9.5% since October 7.
The stock of Camtech, for example, which manufactures test equipment for chip manufacturing machines, has jumped about 143% since the end of February 2022. This is compared to the Tower Simconductor stock, which fell by about 38% for the same period.
The chip market was boiling during the Corona period with the increase in demand for digital and electronic products mainly as a result of the distance and closures, and began to retreat in the years after the Corona due to stocks of chips that had accumulated among manufacturers along with a decrease in demand for various products.
The chip market has since suffered from shuffling, until the arrival of the AI revolution and the start of the race towards the Chinese chip, which revived it and changed the array of forces in it.
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The prominent companies in the field of chips in the Tel Aviv Stock Exchange/image processing, Walla system!
Sergey Vaschunok, a senior analyst at the Oppenheimer Investment House, explains: "Intel lost its lead in the field of chips years ago, mainly due to low investment in new technologies, i.e. in development.
"Its place at the top was taken by Nvidia, which, unlike Nvidia, invested mainly in development and was dependent on subcontractors for production , and is the first to prepare well for the AI revolution and prepared itself with dedicated chips for the subject and as a result is now a monopoly in the field.
"In addition, Intel mainly addresses the computer market, which is a declining market, and it doesn't have that many AI chips. These are the main things that explain the big jump in Nvidia shares and the decline for the period examined in your data table in Intel shares."
What is a chip and why has this small product become the most important component for a technological application?
"A chip is the brain of every digital and electronic product today," Voschunok explains.
"And even products that were not technological in the past have become technological in recent years. For example, the automobile market, which chips began to enter with the multimedia products in the car, and with the latter becoming more computerized, the chips became a more central part of it.
"And not just vehicles, all smart home products, such as a system Home management, smart refrigerator, smart phones, etc., are based on chips.
Thus, if in the past there was a clear separation between non-technological things and technological things, today everything is technological.
And the chips, which are, as mentioned, the brain of every device, have become more demanding.
"However, although there is consistent demand with a steady increase for chips over the past few years, in the last year there has been a weakness in this market, as it has a number of target markets that are in decline such as mobile devices and personal computers.
"In this respect, the AI revolution has given a boost to the chip market, And next to it is the escalation of the cold war between China and the USA, in which the chips play a role. China already announced in 2015 a plan for independence in the production of chips, the main supply of which comes from American companies, and a little from European and Asian ones.
"Even products that were not technological in the past have become technological in recent years"/Image processing, Walla system!
And Sachunok explains that "it must be understood that this is also a huge investment since the establishment of a factory for the production of standard advanced chips today is estimated to cost about 1-10 billion dollars, depending on its size, and according to what currently exists.
"The Chinese began to build and the American government saw a red light, because If China's success lowers its dependence on the US and lowers the capabilities of the Americans against one of the most powerful players on the globe
. to those who depend on her.
"The recent wars raised tensions between China and the US and also led investors to chip companies.
This is because already at the outbreak of the Ukraine war it was evident that the world order created after World War II had been violated, and there are countries that are working to implement a new political order.
"Within this framework, a number of European and Asian countries have already announced their independence in the production of chips, the central one of which, as mentioned, is China. In addition, the understanding that the world order will no longer be as it was has led to the assessment that the next approaching conflict will be in the East: Taiwan or South Korea.
Sergey Vaschunok, senior analyst at Oppenheimer Investment House/PR
The Israeli angle
And how does this affect Israeli companies?
"Here the Israeli companies also benefit, since their main activity is supplying equipment to the chip companies. So when the Chinese and Europeans want to set up factories themselves - the orders from the Israeli companies increase. You can see Nova and Kamtec, for example, that about a third and more of their orders come from China today.
"Kamtec and Nova are equipment manufacturers A test for chip manufacturing plants, when Camtech's activity is more directly connected to the AI niche and this explains the main increase in it.
And the decrease shown in your table in Tower is mainly attributed to the fallout of its acquisition deal by Intel.
"The declines in Mobilay, which supplies chips to the automotive industry aimed at driving aids, are also not related to the geopolitical conflicts but to the stockpile of chips created among the car companies due to the corona virus, which is expected to be released only at the end of 2024.
"In a conversation we had with the company last Tuesday, we were told that in the first quarter of the year there were Extremely low sales, and that the stocks of the car companies are supposed to be depleted at the end of the year, and then Mobileye is supposed to return to more significant sales.
But is there ever resilience?
Not sure, and Vaschunok explains the problem: "Camtech and Nvidia shares are a great example of stocks that are priced high. They are priced at this price due to growth, and the coming year should be a good year for them.
"But what will happen at the end of 2024 and the beginning of 2025?
It is not yet possible to know at this time, but if a scenario takes place in the US and China reached a reconciliation, or China managed to switch to self-production - a large share of the demand that those companies are currently experiencing will disappear.
"In addition, there is a question about the AI.
If indeed the field of AI is only at the beginning of its journey, then there will be demand in the future as well.
But if, as others think, it is in some kind of bubble - then these demands will also fall.
"And one more thing should be remembered: today Nvidia is acting as a monopoly in light of its preparations, but this will not last long and other companies will reach a point to compete with it. The question, therefore, is when will the competition begin, at what level and at what level of product?"
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