Nvida (NVDA) shares lead U.S. chipmakers lower Wednesday following reports that the Biden Administration is considering new export curbs on AI semiconductor exports to China.
The Wall Street Journal reported late Tuesday that the Commerce Department is mulling new restrictions that would halt shipments of AI chips made by Nvidia, as well as Advanced Micro Devices AMD and other companies, to Beijing starting as early as July.
The Biden Administration has already been working 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 CEO Jensen Huang told London's Financial Times last month 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.”
Nvidia shares were marked 2.3% lower in early Wednesday trading to change hands at $409.30 each while AMD shares slumped 2.3% to $107.83 each. Intel (INTC) was down 2.3% at $33.32 each.
Micron Technology (MU), which publishes its third quarter earnings after the closing bell, was marked 0.9% lower at $66.18 each.
Analysts expect Micron to post an adjusted loss of $1.58 per share, swinging from a profit of $2.59 per share over the same period last year, as the impact of its "security review" by China's Cyberspace Administration, put in place as retribution for the Biden administration's ban on the export of high-tech equipment and chips, hammers both its top and bottom lines.
Micron said it expects AI-chip demand is also expected to be a "secular driver" of near-term growth, and the group unveiled plans to invest around $3.7 billion, alongside significant government assistance, to make make next-generation memory chips in Japan earlier this month.
Any ban on China-bound exports would both clip a significant amount of sales from both Nvidia and AMD, but also leave each company, as well as their U.S.-based peers, open to retaliation from Beijing as it continues to challenge Washington's efforts to influence its trade and economic policies.
Last year, both Nvidia and AMD were caught up in the U.S. government's effort to restrict the sale of high-end components to China, including Nvidia's A100 and H100 chips and AMD's MI250 AI chips, as the administration moved to both shore-up domestic production while preventing sensitive technology from finding its way into the Chinese military.
Nvidia said the new rules would have put $400 million worth of sales at risk, but found a work-around by making modifications to its A800 graphics processing unit (GPU) that made it eligible for sale to China-based clients. AMD, meanwhile, was forced to slash its 2022 profit outlook, while trimming $400 million from its revenue forecast.
