Nvidia shipments to China could be hit as soon as early next month, according to a report.
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Nvidia
is likely to be caught in the crossfire of new U.S. rules on exporting artificial intelligence chips to China. This could set it and other chip makers up for a multibillion-dollar hit amid escalating tensions in a critical technology Cold War.
Chip makers play a key role in developing the potentially transformational AI technology at the center of the recent market frenzy. On the downside that means companies like Nvidia (ticker: NVDA) are more vulnerable to geopolitical pressures amid U.S. concerns over powerful AI in Chinese hands. But on the upside demand dynamics mean investors may not need to worry too much.
The Biden administration is considering fresh restrictions on selling chips used in AI to Chinese customers, part of final rules expanding measures announced last October, The Wall Street Journal reported, citing anonymous sources. It could see the Commerce Department move as soon as early July to stop shipments from Nvidia,
Advanced Micro Devices
(AMD), and others to China as well as other markets of concern without first obtaining a license, the report said.
Last year the White House introduced rules aimed at denting China’s AI abilities and that prompted Nvidia to make a lower-performance version of its chips for the Chinese market, but the new restrictions would ban even the sale of those chips without a license, the report said.
Nvidia declined to comment. AMD did not immediately respond to a request for comment.
China is an important market for semiconductors, and new rules have the potential to be a headwind for chip stocks, which have been among the biggest beneficiaries of a recent investing boom focused on companies exposed to AI.
Nvidia stock dropped 1.5% in recent trading Wednesday, with AMD stock down 1.1%. Shares in
Micron Technology
(MU), which in May saw Beijing bar some of its products from being sold to key customers, lost 0.1%. In the broader market, the
S&P 500
was down 0.2% and the
Nasdaq
was up 0.2%.
“With an update on export controls now expected, investors will be assessing just how limiting the new rules will be for chip makers’ sales,” Susannah Streeter, an analyst at broker
Hargreaves Lansdown
,
wrote in a Wednesday note. “A handful of tech companies pack a huge punch on Wall Street due to their sheer size, so any wobble in confidence reverberates on indices.”
It’s likely that chip stocks could see more sell pressure in the near term. That might actually be an opportunity for investors to buy the dip in Nvidia, which has already soared more than 185% so far this year.
“We estimate China data center sales in the 5-10% range of total $30 billion data center sales this year,” Atif Malik, an analyst at Citi, wrote in a Tuesday note. “Overall, we believe AI demand will exceed supply this year and Nvidia can move its chips around.”
Malik reiterated his Buy rating on Nvidia, though noted that the $400 million impact on China sales detailed by the company last year—not yet updated—is now likely to be far higher because of increased demand. The analyst added that Nvidia could comment on this topic as soon as Wednesday, when executives deliver remarks on AI.
The dip-buying opportunity may not last long—or, depending on how the market reacts to any update from Nvidia, there could be a wider window.
Write to Jack Denton at [email protected]
Source: https://www.barrons.com/articles/nvidia-amd-stock-price-china-chip-rules-748e9735?siteid=yhoof2&yptr=yahoo