U.S. Weighs Up Potential Chip Exports Ban to China, AI Stocks Fall
Key takeaways
- The U.S. government is weighing up further curbs on chip makers shipping to Chinese customers
- The move comes as escalating tensions between the two superpowers could see chip shipments halted as soon as July
- Major chip makers, including Nvidia and AMD, suffered stock price falls, as did leading Chinese tech companies
Who knew tiny little chips would be at the center of a geopolitical storm? As the tensions between China and the U.S. escalate, the Biden administration has taken a big step forward in the AI debate with proposed new rules on AI chip exports to the East. AI companies are bearing the brunt of the market fallout. Here’s the latest.
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What’s the latest in AI chips?
The Wall Street Journal first reported this week that the White House is mulling further curbs on AI chip exports to China, including halting shipments to the country as soon as July. Under the potential new rules, chip makers must apply for a license to export chips to China.
It’s not the first time the White House has taken aim at the sector as escalating tensions between the two superpowers simmer. Last year new rules from the U.S. government prompted Nvidia to make a lower-performance AI chip for its Chinese customers, but these further curbs would scupper Nvidia’s loophole.
What was the market reaction?
Nvidia, which has seen a truly incredible run in 2023 thanks to its bet on generative AI has paid off, suffered a 1.5% slump at the news and is down 2.67% in the last five days. Nvidia CFO, Colette Kress, said Nvidia didn’t expect an “immediate material impact” to its bottom line if the measures become a reality.
In the aftermath, AMD shares declined by 0.3%, with the stock falling 1.75% since last Thursday. Intel slumped by 1.2% and Qualcomm fell 1.6%; Chinese tech companies, like Alibaba and Tencent, also suffered losses.
Despite the potential ban, Micron stock has bucked the trend, reaffirming its commitment to the Chinese market. Having fallen 2% at the announcement, Micron shares have since risen by 0.4% in pre-market trading on Thursday thanks to its strong earnings forecast.
The bottom line
Escalations in tensions between the U.S. and China mean that AI companies and their share prices might end up as collateral damage. Wall Street will be holding out for an agreement between the two countries, though the reality of that coming true looks very slim right now.
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