A Creative Deal
The semiconductor giants Nvidia and AMD have agreed to pay the Trump Administration 15% of sales made in China. Yes, you heard correctly. The U.S. President is lifting trade restrictions for advanced chip exports to China, after a rather peculiar deal was struck.
Interestingly enough, this completely contradicts Trump’s stated goal of isolating China globally and slowing down its progress in the AI race. “What for?”, is an appropriate question. That’s pocket change for the treasury, though potentially a massive boost for China’s innovation. Surely, it wasn’t Jensen Huang’s charm that moved the president.
I have been critical of some of Trump’s steps in the past, and while many these moves were double-edged, this one I truly don’t understand. He is giving away, or at least sharing, a technological edge, after having alienated the whole world already. So, you can’t argue that it’s a gesture of goodwill. You don’t run into a bar, shoot five people, and then offer them a beer for their troubles. That’s likely how China will take it as well – a desperate gesture from an out-of-control administration.
For AMD and Nvidia, however, it’s a major win, though it should be pointed out that 15% of all China sales is a strange metric, since it doesn’t consider costs and efforts for making or selling the products. But we are already used to oversimplified calculation methods, since April 2.
Nevertheless, I am sure that Jensen Huang is partying with a great feeling that $20 billion of his company’s revenue is safe – at least for now.
ASML – Short Summary of My Latest Analysis
Yesterday I published a full breakdown of ASML, an exceptional company, undervalued and misunderstood by the market. I’ll briefly outline my key points for an investment case here; if you are interested, check out the complete report on my profile:
ASML is a monopoly. The company is the ONLY supplier of EUV litography machines. These machines lay the foundation for the production of the most advanced chips worldwide. Every major foundry is dependent on ASML’s technology. If they stopped servicing their machines or slowed innovation, the global chip industry would go back to the Stone Age.
People love to talk about Nvidia and AMD, but the truth is that you can forget the AI revolution without ASML. This gives the company enormous pricing power, which it further strengthens by striking exclusive partnerships with suppliers or simply buying them outright.
So, what do you get that for? A 40 P/E? 50, maybe? No, ASML’s stock is trading near multi-year lows at a 25 forward P/E ratio, representing as close to a no-brainer buy for the next five years as you can get.
$NVDA (+0,29%)
$AMD (+0,61%)
$ASML (-0,48%)
$ASML (-0,62%)
$2330
$TSM (-0,24%)
$INTC (+0,82%)
$005930
