As Big Tech struggles to show how it’s ever going to make money from AI, the technology has been a winning chip for the semiconductor industry. 

Despite the shareholder backlash to Silicon Valley’s defiantly all-in approach to costly artificial intelligence initiatives, investors are showing a lot of love to the computer chip supply chain. Nvidia, Samsung, and TSMC are all clawing back significant gains this week.

Chip and Putt

The typical Big Tech hyperscalers — you know, Microsoft, Meta, Google, Apple, and Amazon — are officially in the “prove it” phase of the AI adoption cycle. So far, they haven’t. Microsoft kicked off the week Tuesday with its fourth-quarter earnings report, announcing a 15% year-over-year revenue increase that beat expectations. And yet, Wall Street remained unimpressed. On Wednesday, shares dipped over 1%, extending a roughly 9% decrease over the past month, as the firm’s Azure cloud business disappointed and the company said demand for AI services was outstripping its computing power. Meanwhile, Microsoft’s capital expenditures in the latest quarter hit $19 billion, up nearly 80% from a year prior — it said nearly all that went toward cloud and AI spending. Microsoft sees only one way out: spend more. 

Same with the others. In its earnings call Wednesday, Meta too reaffirmed its commitment to AI spending. And analysts at CFRA said they expect Amazon to “ramp up” investment on AI infrastructure this year.

That’s music to the ears of semiconductor companies, which will continue to thrive so long as Big Tech doesn’t deviate:

• Nvidia, which had fallen around 24% since a June peak, rebounded 13% on Wednesday following Microsoft’s earnings call. Meanwhile, Samsung climbed 3.5%, TSMC over 7%, AMD 4.5%, and Arm 8%. 
• The rising tide lifted just about every player in the semiconductor sea: 24 of the 25 companies in the VanEck Semiconductor ETF posted gains on Wednesday, with most increasing over 2%.

New Rules: Big Tech’s doubling down on AI wasn’t the only good news for the chip industry Wednesday. Reuters also reported that the US government is planning a new rule that would stop some foreign countries from shipping chip-making equipment to Chinese companies — though the rule will include carveouts on shipments from key allied countries like Japan, the Netherlands, and South Korea. That’s huge news for Tokyo Electron and the Netherlands-based ASML, which saw share-price bumps of 15% and nearly 9%, respectively. 

China’s BYD, the world’s biggest EV maker, is hoping to ride-share Uber’s coattails.

On Wednesday Uber announced a new partnership with BYD to get 100,000 of its drivers into the company’s electric vehicles: part of the ride-hailing service’s plans to decarbonize its business. Uber signed a similar deal with Tesla not so long ago — the difference is that the US government hasn’t been trying to freeze Tesla out of the market.

Cheap and Cheerful

Uber and BYD’s deal is for Uber’s global business, and excludes the increasingly inhospitable US market. As part of its trade war with China, the US has imposed tariffs so onerous on China-made EVs that they’re non-existent in America. Thanks in part to Chinese state subsidies, BYD’s cars are pretty much the cheapest electric vehicles you can buy apart from a tricked-out golf cart, and Washington didn’t want them flooding the US market. Same with the EU, which is also gearing up to place higher tariffs on China-made EVs, although they won’t be quite as high as in the US.

Uber’s tie-up with BYD underscores the limits of Washington’s ability to kneecap Chinese firms, especially one on such a roll as BYD:

• BYD’s cheapest model, the Seagull, sells for less than $10,000. The cheapest EVs on the market in the US are somewhere in the $30,000 to $40,000 range.
• Bloomberg Intelligence forecast last week that BYD is on track to overtake Tesla as the top global seller of EVs by the end of the year.

Cheaper by the Dozen: Uber’s deal with BYD intends to make its vehicles even cheaper to buy and maintain. “To support drivers going electric, the companies’ joint efforts may also include discounts on charging, vehicle maintenance, or insurance, as well as financing and lease offers, based on what works best for drivers in a given market,” Uber said in a statement. 

Boeing is hoping the third CEO in five years is the charm.

The aerospace manufacturing giant announced Wednesday that Robert “Kelly” Ortberg, an industry veteran, will take over as CEO on Aug. 8. He inherits the mother of all PR disasters, as well as financials that could generously be described with terms only slightly better than that.

The Outsider

Ortberg’s two predecessors, outgoing CEO Dave Calhoun and former CEO Dennis Muilenburg, were both promoted from within the family — the former was board chairman when tapped for the job, while the latter worked his way up the executive ladder. Ortberg, 64, is an outsider who retired in 2021 as head of major aviation parts supplier Rockwell Collins, now part of RTX Corp. This may be a good thing.

Calhoun’s and Muilenburg’s tenures ended in disarray, as Boeing has been saddled with years of production issues that led to crashes, accidents, and malfunctions. Whistleblowers have accused the company of cutting corners, the FAA has capped the number of 737 Max planes it can produce, and last week Boeing finalized a deal to plead guilty to fraud for misleading regulators about faulty software involved in two fatal crashes in 2018 and 2019. The outside perspective could mark a PR reset, though regardless Ortberg will want to find the office coffee machine before his first meeting with accounting:

• Boeing reported on Wednesday that it lost $1.4 billion in the second quarter, with revenue down 15% year-over-year to $16.9 billion. Shares are down 26% this year, and there is more regulatory scrutiny to come, as well as crunched supply chains, frustration from airlines waiting on order backlogs, and tense labor negotiations that include a strike threat.
• One major task ahead for Ortberg will be integrating Spirit AeroSystems, a struggling parts supplier that Boeing split off two decades ago and agreed to buy for $4.7 billion in June. His experience may help: At Rockwell Collins, he oversaw the acquisition of transport communications firm ARINC and aircraft interiors manufacturer B/E Aerospace — and saw the company through its acquisition by United Technologies Corp. and UTC’s subsequent acquisition by RTX.

Rival Woes: If there’s any consolation, the competition is not too hot, either. Boeing’s chief rival Airbus announced earlier this week that its net profit fell 78% in the second quarter to €230 million ($248 million) and slashed its delivery forecasts as it struggles with supplier problems across its business.