US Export Restrictions Hit Chip Stocks, Wiping Out $73 Billion

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The semiconductor industry experienced a notable downturn as the United States unveiled stringent modifications to export controls. These updates aimed to impede China’s access to advanced computer chips, encompassing restrictions on the sale of semiconductors designed by Nvidia Corp. specifically for the Chinese market.

Impact on Market Value:

The PHLX Semiconductor Sector index, representing 30 chip stocks, braced for a substantial decrease, potentially wiping out a collective market value of approximately $73 billion.

Focus on Nvidia’s Chips:

Of particular focus were Nvidia’s A800 and H800 chips, pinpointed by the US for tighter controls. These regulations now necessitate companies to seek approval from the US government before vending chips that fall below the stipulated threshold. Although top-tier chips are vital for robust artificial intelligence models, a slightly lower class of chips could also serve AI and supercomputing purposes, posing a risk, as highlighted by a senior administration official.

Nvidia’s Response:

Nvidia assured compliance with all relevant regulations while catering to its clientele. Given the global demand for its products, the company anticipated minimal impact on its outcomes despite these regulatory adjustments.

Analyst Insights:

An analyst from Bloomberg Intelligence acknowledged the predictability of these rule modifications. However, there is a projection that Nvidia could face repercussions in the future due to these changes. Although short-term estimates may not be significantly affected, these restrictions could potentially impinge on Nvidia’s long-term prospects. The recent surge in orders from substantial Chinese clients indicated a pre-emptive stockpiling of 800-series chips in anticipation of such regulations, effectively advancing sales.

Stock Market Reaction:

Following this announcement, Nvidia witnessed a substantial intraday plunge of up to 7.8% on Tuesday, marking its most significant drop since December.

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