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Tech losses weighed down on the major indices Thursday, continuing yesterday’s selloff amid concerns that tighter restrictions on exports to China may have a broad impact.
The tech sector led losses on the S&P 500 as shares of Nvidia (NVDA) dropped over 3% in recent trading, making it one of the leading decliners on the Dow Jones Industrial Average. The stock was down close to 7% after the chipmaker revealed that it will take a $5.5billion hit due to new restrictions on exports of its H20 processors to China.
Shares of Advanced Micro Devices, which warned that it would be hit by new China export restrictions as well, fell 1%. Broadcom (AVGO), Micron Technology(MU) and other semiconductor stocks also fell, as did shares of server maker Super Micro Computer (SMCI), a partner of Nvidia and several other AI hardware manufacturers. (Read Investopedia’s live coverage of today’s market action here.)
"Rising AI restrictions are likely to impact other key AI-levered computing, networking and optical stocks (AVGO, AMD, MU, ARM, MRVL, COHR, LITE) and raise concerns around enhanced restrictions in other areas," Bank of America analysts said following the news from Nvidia.
Like Morgan Stanley analysts, they added Nvidia’s write-down indicates a “low probability of future licenses” to circumvent the new restrictions, and that AI diffusion rules set to take effect in May could further limit sales of American AI hardware to a broader set of countries.
Wedbush analysts said in a note to clients on Thursday that they expect few tech companies to provide guidance over the next 30 days given this Twilight Zone background. While the Nvidia announcement is alarming, it’s not surprising as we are in a trade war with China. Expect more punches to be thrown before cooler heads prevail. Negotiations in some form will begin to play out in the coming weeks/months.
