Top Trends in Cloud Chips

The progress of cloud computing is mirrored in the underlying components that support it. Companies such as Intel (Nasdaq: INTC), Advanced Micro Devices (AMD, Nasdaq: AMD), and NVIDIA (Nasdaq: NVDA) aim to deliver chips that enable the systems that fuel cloud-based environments. And the leading cloud providers AWS (Amazon, Nasdaq: AMZN), Microsoft Azure (Nasdaq: MSFT), and Alphabet’s Google Cloud Platform (Nasdaq: GOOGL) have their own chip stories to tell.

Weeding through all the news can be daunting, so we’ve picked a handful of the recent top trends in cloud-oriented components, or cloud chips, for closer examination. Read on:

Trend #1: Chip shortages persist. The shortage of computer chips plaguing the automotive and other tech industries shows little sign of abating, particularly given dire trends in the geopolitical environment, including Russia's invasion of Ukraine. Still, there are glimmers of hope. “[W]e we are making progress. I do believe that the first half of this year will continue to be quite tight. But the second half of this year, I think things will get a little bit better,” AMD CEO Lisa Su recently told Yahoo Finance Live. Others are less optimistic. Not only are chips in short supply; the underlying materials for making them are running very low. Sumco, a supplier of the silicon wafer material chips are based on, has reportedly sold out its current and planned inventory through 2026. In truth, there are no crystal balls here, though hopeful observers say improvement could could happen gradually over the next few quarters.

Trend #2: Foundry plans flourish. The chip shortage has pressed cloud component makers into action. Intel in particular has made a major strategic shift toward creating new foundries in the U.S. and Europe, potentially easing reliance on Asian sources such as Taiwan Semiconductor Manufacturing Company (TSMC, NYSE: TSM). Intel also recently purchased Israel’s Tower Semiconductor for $5.4 billion in part to grab that vendor’s analog chip factories. While U.S. chip makers worry about TSMC's position relative to China, TSMC itself is planning a series of new U.S. facilities. But all of these plans will take several years to fulfill. Progress could be helped if Congress passes the CHIPS for America Act, providing incentives for U.S.-based foundries. As of this writing, lawmakers were still debating the bill.