Shares of US chipmakers fell on Wednesday following a report that the Biden administration was planning new restrictions on the export of artificial intelligence computer chips to China starting in July.
Companies like Nvidia, Advanced Micro Devices and Intel, which depend on the world’s second-largest economy for at least a fifth of their revenue, fell between 0.8 and 1.8 percent, caught in the crossfire between the United States and Chinese.
The Philadelphia Chip Index fell 0.9 percent.
Last year, US officials ordered Nvidia to stop exporting its two best AI chips to China to limit the country’s technological capacity.
Months later, Nvidia released a new advanced chip called the A800 in China to comply with export control regulations.
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 US export license, according to the Wall Street Journal report.
Restrictions on sales of data center graphics processing units to China would affect future financial results, Nvidia’s chief financial officer Colette Kress said on Wednesday. However, the company does not expect the additional restrictions to have an immediate material impact on its results.
“Now that an update on export controls is expected, investors will be assessing how restrictive the new rules will be for chipmakers’ sales,” said Susannah Streeter, director of money and markets at Hargreaves Lansdown.
“A handful of tech companies have a big impact on Wall Street because of their sheer size, so any wobble in confidence hits the indices.”
Rising expectations about advances in AI have helped Wall Street rise this year, with Nvidia in the top spot in the S&P 500 Index, gaining 187 percent year-to-date.
But the sharp rise in shares has also raised questions about lofty valuations.
Nvidia is trading at 47 times its expected 12-month earnings, while AMD is at a multiple of 31.2 and Intel at 31.8, well above the S&P 500’s multiple of 19, according to Refinitiv data.
Philadelphia’s chip index is up more than 44 percent year-to-date, well above the benchmark index’s 14 percent rise.
Across the Atlantic, however, Nordic Semiconductor, Dutch ASML chipmaker Milan-listed STMicroelectronics closed 2.3 percent to 6.4 percent higher.
© Thomson Reuters 2023