Chip stocks tumbled as the US imposed new restrictions on AI access to China

(Reuters) – U.S. chipmakers fell in premarket trading on Wednesday after the Biden administration proposed new restrictions on exports of artificial intelligence computer chips to China in early July.

Companies that rely on the world’s second-largest economy have lost at least a fifth of their revenue, such as Nvidia, Advanced Micro Devices and Intel, amid the US-China conflict.

Nevia fell 4%, Advanced Micro Devices fell 3.3% and Intel fell 0.7%, while futures for the tech-heavy Nasdaq 100 index fell 0.5%.

The new restrictions being considered by the Commerce Department include a ban on the sale of Nvidia’s advanced chip, the A800, without a special US export license.

“With export control reforms now expected, investors will be assessing the extent to which the new regulations could limit chipmakers’ sales,” said Hargreaves Lansdowne, head of finance and markets.

“Few tech companies pack a big punch on Wall Street because of their size, so any sense of confidence is reflected in the indexes.”

Rising expectations of advances in AI have helped boost Wall Street this year, with Nvidia at the helm of the S&P 500 index, which has jumped 187% this year.

But the sharp rise in shares has cast doubt on higher valuations.

Nvidia trades at 47 times estimated trailing-12-month earnings, while AMD trades at 31.2 times and Intel at 31.8 times the S&P 500 multiple, 19 times higher than the S&P 500, according to Refinitiv data.

The Philadelphia chip index is up more than 44% this year, well ahead of the benchmark index’s 14% gain.

Among other chip stocks, Marvell Technology, Applied Materials, Intel, Microchip Technology fell between 1.1% and 3% on Wednesday.

Across the Atlantic, Nordic Semiconductor, Dutch chipmaker ASML, while Milan-listed STMicroelectronics gained between 1.2% and 2%.

(Reporting by Meda Singh in Bengaluru; Editing by Arun Koyur)

By W_Manga

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