Chip stocks smacked as U.S. mulls fresh curbs on AI access to China
2023.06.28 10:14
© Reuters. Semiconductor chips are seen on a printed circuit board in this illustration picture taken February 17, 2023. REUTERS/Florence Lo/Illustration
By Medha Singh
(Reuters) – Shares of U.S. chipmakers fell on Wednesday following a report that the Biden administration was planning new curbs on export of computing chips for artificial intelligence to China as early as July.
Companies such as Nvidia (NASDAQ:), Advanced Micro Devices (NASDAQ:) and Intel (NASDAQ:), which rely on the world’s second largest economy for at least a fifth of their revenue, fell between 1.6% and 2.4%, caught in the U.S.-China crossfire.
The Philadelphia chip index dropped 1.4%.
Last year, U.S. officials had ordered Nvidia to stop exporting its top two AI chips to China to limit the country’s technological capability.
Months later, Nvidia launched a new advanced chip called A800 in China to meet export control rules.
The new restrictions being considered by the Commerce Department would also include a ban on the sale of Nvidia’s A800 chip without a special U.S. export license, the Wall Street Journal report said.
“With an update on export controls now expected, investors will assess just how limiting the new rules will be for chip makers’ sales,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“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.”
Rising expectations over the advancements in AI have helped Wall Street climb this year, with Nvidia at the pole position on the , gaining 187% so far this year.
But the sharp rise in shares has also sparked doubts over lofty valuations.
Nvidia is trading at 47 times its expected 12-months earnings, while AMD is at a 31.2 multiple and Intel at 31.8, way above the S&P 500’s multiple at 19, according to Refinitiv data.
The Philadelphia chip index has surged more than 44% so far this year, far ahead of the benchmark index’s 14% rise.
Across the Atlantic, Nordic Semiconductor, Dutch chipmaker ASML, Milan-listed STMicroelectronics, however, gained between 1.2% and 4.3%.
