What Happened?
A number of stocks fell in the afternoon session after reports revealed that China is moving to substitute US technology by adding domestic AI chips to its government procurement list.
This development is part of a broader "buy local" campaign aimed at reducing China's reliance on foreign technology, particularly from the United States, amid persistent trade and tech tensions. The Chinese government has updated its guidelines to include AI chips from homegrown companies like Huawei and Cambricon. This policy shift effectively steers government and state-affiliated buyers away from American semiconductor firms. For US chipmakers, this signals a potential loss of market share in one of the world's largest tech markets, raising concerns among investors about future revenue streams from the region.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Analog Semiconductors company Himax (NASDAQ: HIMX) fell 3.5%. Is now the time to buy Himax? Access our full analysis report here, it’s free for active Edge members.
- Processors and Graphics Chips company Intel (NASDAQ: INTC) fell 3.5%. Is now the time to buy Intel? Access our full analysis report here, it’s free for active Edge members.
- Semiconductor Manufacturing company Marvell Technology (NASDAQ: MRVL) fell 3.8%. Is now the time to buy Marvell Technology? Access our full analysis report here, it’s free for active Edge members.
- Processors and Graphics Chips company Allegro MicroSystems (NASDAQ: ALGM) fell 3.1%. Is now the time to buy Allegro MicroSystems? Access our full analysis report here, it’s free for active Edge members.
- Semiconductor Manufacturing company IPG Photonics (NASDAQ: IPGP) fell 3.2%. Is now the time to buy IPG Photonics? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Marvell Technology (MRVL)
Marvell Technology’s shares are extremely volatile and have had 44 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 9.2% on the news that concerns surfaced about the loss of key custom chip design contracts with major hyperscale cloud providers.
A report indicated that Microsoft is discussing future custom AI chip designs with competitor Broadcom, a role typically associated with Marvell’s custom silicon business. Compounding this fear, a Benchmark analyst downgraded the stock to "Hold" citing a "high degree of conviction" that Marvell has lost Amazon Web Services' (AWS) next-generation Trainium 3 and 4 chip designs to Taiwanese competitor Alchip. Since Marvell's AI-driven growth story is heavily reliant on these custom accelerator (XPU) programs, the potential loss of two critical customers prompted investors to sell, outweighing the generally bullish long-term sentiment from other analysts.
Marvell Technology is down 21.4% since the beginning of the year, and at $89.26 per share, it is trading 29.2% below its 52-week high of $126.06 from January 2025. Investors who bought $1,000 worth of Marvell Technology’s shares 5 years ago would now be looking at an investment worth $2,079.
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