The chips are down again: Lucrative AI stocks are the latest companies to get ensnared in the US and China’s ever-escalating trade war.
President Trump’s newest move against China is to cut off the international rival from key AI hardware. This includes Nvidia’s new H20 chip and AMD’s MI308 chip, which the White House says could help China build a supercomputer.
As a result, Nvidia revealed it will take a $5.5 billion hit from the new policy. The irony is that Nvidia specifically created the H20 chip to comply with previous trade restrictions, while previously agreed-upon sales and inventory will create the massive writedown. Meanwhile, Advanced Micro Devices reported its own $800 million writedown due to the chip export restrictions.
That wasn’t the only bad news for the semiconductor industry today. Dutch semi stock ASML, a bellwether for the industry, reported its net bookings for the quarter only hit $4.48 billion—far below the roughly $8.1 billion it reported in the last quarter of 2024. All eyes are now on Taiwan Semiconductor Manufacturing Company (TSMC), which will report earnings tomorrow.
Nvidia sank 6.87% today, while AMD fell 7.35%, and ASML lost 7.06%. Other names across the semiconductor industry such as Samsung Electronics, SK Hynix, and TSMC all ended the day in the red due to Trump’s new policy.
By the way: Those weren’t the only trade war escalations rocking markets. Trump also ordered a probe into new tariffs on critical mineral imports, which could hit nickel, cobalt, and other metals key to building advanced tech. The White House is also considering rolling out new tariffs on pharmaceutical imports and semiconductors.
What does this mean for the AI trade?
AI stocks were the backbone propping up the stock market’s bull run in 2023 and 2024. Analysts were already skeptical that they could keep growing at the same breakneck pace even before all this tariff drama. So what now?
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“Tariffs and geopolitical tensions remain a near-term and long-term concern for Nvidia and other chipmakers, while the future of AI expansion isn't crystal clear either. These factors, among others, underpin our very high uncertainty rating. China is just one of many moving pieces,” wrote Morningstar equity analyst Brian Colello in a note. Colello also lowered his fair value rating for Nvidia from $130 down to $125.
While a $5.5 billion writedown certainly hurts, Nvidia shareholders shouldn’t necessarily worry about the money lost today. What’s worse is that this latest export restriction is a sign from the White House that Nvidia will continue to be used as a bargaining chip in the ongoing trade war, argued Wedbush equity analyst Dan Ives.
“The financial impact is small relatively, but the strategic blow is the focus of the market as Nvidia now has massive blockades going after the China market in the middle of this raging US/China tariff battle,” he wrote.—LB