Featuring:

Alvin Nguyen, Senior Analyst

Show Notes:

Once considered a commoditized market, semiconductors have emerged as a critical component to technology infrastructure, national security, and enterprise growth in the age of AI. In this episode of What It Means, Senior Analyst Alvin Nguyen sheds some light on the shifting market dynamics and players in the semiconductor industry.

The episode begins with a discussion of the impact that the CHIPS Act has had on semiconductor manufacturing in the US. While actual production increases in US production haven’t materialized due to the time it takes to build foundries, there have been strong commitments from major players like Intel and TSMC, which have provided some hope for long-term flexibility and resilience. Nguyen says the CHIPS Act started the ball rolling in the US, and there is plenty of momentum to capitalize on. The conversation also touches on global semiconductor manufacturing trends as countries like Germany, Japan, and South Korea have also begun incentivizing local production. The increase in geographic diversity in chip manufacturing could benefit the market as a whole.

And it’s not just traditional chipmakers increasing semiconductor production. Nguyen points out that hyperscalers like Amazon Web Services (AWS) and Google have begun developing their own chips to reduce reliance on overstretched players like Nvidia. The hyperscalers’ chips are tailored for specific workloads, ensuring greater control and efficiency. “Hyperscalers can’t afford to be beholden to suppliers,” Nguyen notes, emphasizing the drive for independence in critical AI technologies. The episode also looks at the benefits and risks of Nvidia’s push to expand beyond chips into platforms and services, a move designed to maintain its dominance while entering new markets.

Nguyen also provides his insights on the recent departure of Intel CEO Pat Gelsinger. While he says it wasn’t a complete surprise, the departure was abrupt and caught the market off guard. “One of the big things here for tech leaders to look at is who Intel’s board picks [to replace Gelsinger]. Because what that new CEO does to Intel’s transformation plan will tell everybody how much longer this transformation effort’s going to take and how turbulent it’s going to be.”

The episode closes with Nguyen offering his final thoughts for firms that are concerned about ongoing chip supply constraints in the coming years, so be sure to stick around for that.