Nvidia tumbles, leading chip stocks lower, on new US-China export restrictions

The U.S. tightened the rules that ban the export of key AI technologies to China, sending chip stocks sharply lower in early trading.

Oct 17, 2023 - 19:30

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Nvidia tumbles, leading chip stocks lower, on new US-China export restrictions

Updated at 9:44 am EDT

Nvidia (NVDA) - Get Free Report shares led U.S. chipmakers lower in early Tuesday trading after Trade Secretary Gina Raimondo unveiled expanded restrictions on the sale of advanced technologies to China.

The new restrictions, which expand upon new export rules put in place last year, are designed to limit China's access to "advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers that are critical to (Chinese) military applications," Raimondo said.

The rules also address a loophole in the previous restrictions, which allowed Nvidia to sell its A800 and H800 semiconductors, by focusing on overall performance as opposed to the computing power of individual chips.

Nvidia CEO Jensen Huang told London's Financial Times last spring that the U.S. risked "enormous damage" to its tech sector as a result of tighter China restrictions, saying the new rules would “cut the Chips Act off at the knee”.

"If China can’t buy from the United States, they’ll just build it themselves," Huang told the paper. "So the US has to be careful. China is a very important market for the technology industry.”

The Biden administration has been working for months on ways in which to steer AI-related technology investments away from China, with Japan, host of this year's G-7 Summit in Hiroshima, proving to be one of the key beneficiaries.

China’s Ministry of Foreign Affairs described those efforts as "economic coercion and sci-tech bullying" earlier this year and described the moves as "against the principles of market economy and fair competition."

Nvidia shares were marked 5.75% lower in early Tuesday trading to change hands at $434.91 each, while AI rival Advanced Micro Devices (AMD) - Get Free Report fell 2.9% to $103.42 each. Intel (INTC) - Get Free Report shares fell 2.9% while Marvell Technology (MRVL) - Get Free Report was down 1.9%.