Chip stocks including Nvidia (NVDA), AMD (AMD), and Intel (INTC) dipped in pre-market trading at the time of writing on Wednesday after a Wall Street Journal report that the U.S. Government could be considering restricting the exports of artificial intelligence (AI) chips to China.
Back in September last year, Nvidia stated that U.S. officials had asked the chip giant to stop exporting two AI chips to China. This resulted in the company offering a new advanced chip called A800 in China and making changes in its H100 chip earlier this year to comply with export control regulations.
According to the Wall Street Journal report, the new restrictions would curb the sale of even the A800 chip unless Nvidia secures a special U.S. export license.
Following the report, top-rated Citi analyst Atif Malik while reiterating a Buy on Nvidia noted that the new restrictions on chip exports to China could result in a higher impact on NVDA’s revenues than the $400 million impact on its sales in China as projected by the company last year.
Malik commented, “We estimate China data center sales in the 5-10% range of total $30 billion data center sales this year. Overall, we believe AI demand will exceed supply this year and Nvidia can move its chips around”
The analyst has a price target on NVDA stock of $420, implying an upside potential of 0.3% at current levels.
Today’s dip in chip stocks aside, overall the semiconductor sector has fared well this year as indicated by the VanEck Semiconductor ETF (SMH). This semiconductor ETF has soared by more than 50% year-to-date.
