US Chip Manufacturer Shares Drop After Planned Export Restrictions To China

JAKARTA - US chipmaker stocks fell in pre-exchange trading on Wednesday following reports that the Joe Biden administration is planning new restrictions on the export of computing chips for artificial intelligence to China starting July.

Companies that rely on the world's second-largest economy for at least one-fifth of their revenue, such as Nvidia, Advanced Micro Devices (AMD), and Intel, are down as they are caught in a fight between the US and China.

Nvidia is down 4%, Advanced Micro Devices is down 3.3%, and Intel is down 0.7%, while futures contracts that track the Nasdaq 100 index dominated by the technology sector are down 0.5%.

The new restrictions being considered by the Commerce Department will include a ban on the sale of an advanced Nvidia chip called the A800 without a special export license from the US.

"With the latest developments regarding expected export control, investors will assess the extent to which the new rules will limit chip manufacturer sales," said Susannah Streeter, Head of Money and Markets, Hargreaves Lansdown.

"A number of technology companies have had a huge impact on Wall Street because of their large size, so any doubt will affect the indexes," he added.

Expectations are increasing over advances in artificial intelligence have helped Wall Street rise this year, with Nvidia at the forefront of the S&P 500 index with a 188% jump so far this year.

However, the sharp rise in these stocks also raises doubts about the high valuation.

Nvidia is trading with expected profit multiplication in 12 months 47 times, while AMD is at 31.2 and Intel at 31.8, well above the S&P 500 multiplication at 19, according to Refinitiv data.

Philadelphia's chip index has surged more than 44% so far this year, well ahead of a 14% increase in the benchmark index (.SPX).

Among other chip stocks, Marvell Technology, Applied Materials, Intel, and Microchip Technology fell between 1.1% and 3% on Wednesday, June 28.

Across the Atlantic, Nordic Semiconductor, Dutch chip company ASML, and Milan-listed STMicroelectronics, however, rose between 1.2% and 2%