US chip export restrictions to China trigger market upheaval
The US administration has introduced further restrictions on the export of advanced AI chips to China. Nvidia announced that, due to this, it will write down $5.5 (CAD 7.7) billion in the first quarter of the fiscal year. The government's decision caused significant declines for technology giants on the stock exchanges.
The United States is once again impacting the Chinese economy. The H20 chip, which was specifically designed with the Chinese market in mind due to earlier export restrictions, now requires a special export licence. According to information provided to Nvidia by the US government, this requirement will apply indefinitely. As a result, existing chip stocks have become unsellable, forcing the company to make a significant write-down.
The market reacted immediately. Nvidia shares lost 6.5 percent in pre-market trading. Declines also affected other key semiconductor manufacturers – AMD recorded a drop of over 7 percent, Intel lost 2 percent, and Broadcom fell by 3.5 percent. Shares of the Taiwanese giant TSMC, traded in the US, fell by 2 percent.
The imposed restrictions are part of a broader US strategy aimed at hindering China's access to the most advanced semiconductor technologies. The H20 chip, although a weaker version of Nvidia's most efficient AI chips, was designed to meet previous US export requirements. However, the new regulations have rendered even these tailored chips unsellable without special permission.
Consequences for the global technology market
The impact of the new restrictions extends far beyond just Nvidia. Futures contracts for the Nasdaq 100 index fell by 1.5 percent on Tuesday evening, indicating broader investor unease about the technology sector. Giants such as Apple, Microsoft, Alphabet, Amazon, and Meta Platforms also registered declines after the regular trading session ended.
The restrictions imposed by the US are part of the ongoing technological tension between Washington and Beijing that has been occurring for years. US authorities argue that advanced chips could be used in Chinese supercomputers, posing a threat to US national security. Nvidia reported that the announced $5.5 (CAD 7.7) billion write-down includes inventories, purchase commitments, and related reserves for products from the H20 line.
Market analysts point out that the new restrictions may have long-term consequences for the global semiconductor supply chain. China is a vast market for chip manufacturers, and further restrictions force companies to seek alternative business strategies. Some experts predict that this may accelerate Chinese investments in the development of their own semiconductor technologies, which in the longer term could change the balance of power in the global technology market.
