YMTC Ban Likely A Plus For Micron & Western Digital, While A Minus For AMD & NVIDIA, Analyst Says

  • Mizuho analyst Vijay Rakesh saw the potential for a Yangtze Memory Technologies Co ban and expanding restrictions from AI or GPUs to include compute/memory, happening in short order.
  • Based on checks from his Washington team, the analyst believes expanded restrictions could happen soon. 
  • He assumed a ban on YMTC could be a near-term positive for memory and Micron Technology, Inc MU (Neutral; Price Target $52) or Western Digital Corp WDC (Neutral; Price Target $40), but he believes YMTC already has the equipment to ramp wafers through 2023E.
  • While he believes MU is positioned well with new roadmap ramps, near-term headwinds remain into 2023E with softening demand for PC and handsets and a deteriorating pricing environment for DRAM and NAND as the industry remains modestly oversupplied. 
  • WDC has executed well overall, but he sees NAND trending even softer into 2H22 and 2023E as demand paused for PCs and handsets with inventory correction. 
  • He also sees emerging entrants into the NAND landscape, such as YMTC, bringing on capacity in 2023E and beyond, with NAND oversupply likely to continue, impacting pricing and margins.  
  • There could be expanded restrictions from AI or GPUs to include compute, CPU, and data center, an increased negative to Advanced Micro Devices, Inc AMD (Buy; Price Target $125) or NVIDIA Corp NVDA (Buy; Price Target $205).
  • The restrictions on >128L NAND and <18nm DRAM memory equipment sales and the possible addition of YMTC to the entity list could be harmful to WFE, with 2023E WFE downside to as low as <$80 billion. 
  • He believes AMD is well positioned and has a significant opportunity to gain server share targets and upcoming game console launches.  
  • While NVDA's valuations were steep, he believes improving PCs, AI deep learning and inferencing markets, gaming trends, automotive, and data center position it for upside to estimates. 
  • NVDA is also well positioned for the growing machine learning, deep learning, and AI markets driving 10-11x performance versus CPUs, in his view. 
  • His NVDA price target reflects its >90% market share in critical high-margin Data Center AI. 
  • Price Action: MU shares traded higher by 0.91% at $54.45 on the last check Wednesday.
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