Chip sector faces uncertain export future
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Illustration: Aïda Amer/Axios
The dip in chip stocks this week may be a preview of what’s to come.
Catch up fast: Shares of Nvidia and AMD briefly fell 3% yesterday after a WSJ report said that the Biden administration could tighten export rules for AI chips headed to China.
- Later in the day, Treasury Secretary Janet Yellen told MSNBC that the U.S. will continue to take actions to protect national security interests “even if it imposes some economic costs” on the country.
The big picture: The Biden administration wants to limit Chinese ambitions in AI by cutting off the supply of advanced chips from the U.S.
- The White House is worried that private Chinese companies will develop technologies that ultimately boost Beijing’s military and intelligence efforts, Axios’ Dave Lawler notes.
Collateral damage: The semiconductor industry’s revenues from China, which are significant, will likely take a hit.
- Nvidia, for example, generated 22% of its annual revenue last year from China and Hong Kong.
- Equipment producer Lam Research saw 31% of its latest fiscal year sales come from the region.
Zoom out: Future restrictions could complicate a wider range of companies throughout global supply chains.
- Last fall, as the administration’s initial AI chip export rules took effect, shipments of basic items like light bulbs and springs for chipmaking equipment were held up as vendors sought special licenses.
What to watch: Investors and analysts don’t seem worried about the potential for future disruption from new national security policies.
- They’re focused instead on the longer-term impacts of AI on the chip sector.
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