Export rule clobbers Nvidia, AMD stock in US-China tension

Thursday was a bad day for chip stocks.

Nvidia declined at market close 7.6% to $139.37 while AMD fell 3% to $82.33, after both companies received warnings from the U.S. government to curb sales of some of their acclerator chips to China and Russia.

Nvidia said in an 8-K last Friday that the U.S. government “indicated that [a] new license requirement will address the risk that the covered product may be used in, or diverted to, a ‘military end use’ or ‘military end user’ in China and Russia.”

AMD said it did not see a material impact from the restriction.

However, TF International Securities analyst Ming-Chi Kuo said investors were worried the U.S. government might expand restrictions on more chips which could impose a risk on the entire chip sector.

The restrictions are expected to impact Nvidia’s A100 and H100 Tensor Core GPU chips for machine learning acceleration. AMD said the change would impact Instinct MI250 Accelerator chip sales to China. Both companies have already halted sales to customers in Russia following Russia’s invasion of Ukraine.

Nvidia said Friday the new license requirement may impact its ability to complete development of the H100 or support existing customers of A100 and cause Nvidia to move certain operations out of China. Nvidia had previously warned the license requirement could impact $400 million in potential sales to China.

On Wednesday, Nvidia reported the U.S. government offered a partial reprieve and has authorized exports and transfers needed to continue development of the H100 and allows exports to support U.S. customers of the A100 through March 1, 2023, and order fulfillment and logistics through Nvidia’s Hong Kong facility for another year, through Sept. 1, 2023.

Share declines hit other companies Thursday, including Qualcomm, Marvell and Intel, although mid-day declines improved at the closing bell. The Philadelphia Semiconductor Sector index of 30 chip companies fell nearly 2% to $2,635.95.

China’s government on Thursday called for the U.S. to repeal its export curbs after Nvidia said a new product might be delayed and some work moved out of China, according to the AP.

“Every day, geopolitics become more heated and are going to pose ongoing disruptions as electronics companies think about strategies and products and components,” said Jen Strawn, head of sourcing for the Americas and EMEA for Rand Technology. “It shows more than ever the importance of steps being taken to bring fabs to the U.S.  so geopolitical issues don’t become so devastating.” Rand is a global component sourcing and supply chain solutions company.

The share declines for Nvidia and AMD came on the same day Micron announced plans for a $15 billion memory fab in Boise, Idaho.  Strawn noted the Micron fab and others proposed by Intel and Samsung will take years to build, provision and test before producing needed chips.  Micron shares rose 1.38% at market close on Thursday, reaching $57.31.

RELATED: Micron to build $15B memory fab near its Boise HQ