Nvidia & AMD stock drops after disclosure of US export restrictions

Nvidia & AMD stock drops after disclosure of US export restrictions Nvidia (NVDA) and Advanced Micro Devices (AMD) claimed new U.S. export restrictions would limit sales to China, sending shares of both company and other semiconductor stocks plummeting. While AMD claimed the new rules would have no material impact on its business, Nvidia anticipates a $400 million loss in potential sales in the current quarter. In early Thursday trading, Nvidia shares plunged more than 8% on the news, while AMD shares sank more than 5%.

KEY LESSONS
1) New export restrictions imposed by the United States would limit sales to China and Russia.
2) Nvidia, AMD, and other semiconductor companies may face losses in business.
3) Additional limitations on exports of vital technology products to China may be issued in the future, according to the Commerce Department.

The new export limitations imposed by the United States require licenses to ship specific products to China and Russia. A Commerce Department spokesperson stated that the agency may impose more restrictions to prevent China from using these technologies for surveillance and military modernization initiatives. The US government has increased prohibitions on selling certain technologies to China in recent years, claiming that many commodities sold through civilian supply chains were eventually repurposed for military use.

The new restrictions are expected to affect Nvidia’s A100 and H100 chips, which are designed to accelerate machine learning activities, as well as other systems that use them. Nvidia ranks among the top ten semiconductor firms in terms of 12-month trailing (TTM) sales. The requirements, according to AMD, will have an influence on its MI250 artificial intelligence processor shipments to China, but the new legislation will not have a meaningful impact on business.

Both Nvidia and AMD stated that the limitations would largely affect sales to China, as they do not already sell products to clients in Russia due to the country’s invasion of Ukraine. According to a Yale School of Management study, over 1,000 enterprises have withdrawn from Russia since the invasion. Nvidia shares are down more than 54% year to date, while AMD shares are down 46%.