US Market Recap: Chip Stocks Dropped Jointly on the New Chip Restriction Rule

 

 

On Monday, President Biden announced the latest control regulation for AI chip manufacturing in the US. The regulation caps the quantity of chips that US companies can sell to most countries.

 

Specifically, this regulation does not restrict chip sales to 18 key allies and partners. Chip orders placed by universities, medical institutions, and research institutes with clearly harmless purposes do not require a license and do not count toward the cap. Entities that meet high security and trust standards and are based on close allies and partners can acquire the highly trusted Universal Verified End User (UVEU) status. Entities granted this status can place up to 7% of their global AI computing power in countries around the world - potentially equaling hundreds of thousands of advanced chips. Entities that meet the same security demand and are headquartered in non-cooperating countries can apply for Nationally Validated End-User (NVEU) status, allowing them to purchase the computing power equivalent of up to 320,000 advanced GPUs over the next biennium. Non-VEU entities outside of close allies can only purchase up to 50,000 advanced GPUs per country.

 

US Commerce Secretary Raimondo said that companies would have a 120-day comment period on this regulation.

 

US companies generally object to the regulation, saying it would undermine the competitiveness of the US chip industry.

 

John Neuffer, president and CEO of the Semiconductor Industry Association (SIA), said the policy, which was rushed through days before the presidential transition and did not adopt the industry's suggestion, would deteriorate the US exports of advanced chips. He emphasized that the policy could cede the chip market to competitors and continually damage the US economy and the global competitiveness of semiconductors and artificial intelligence.

 

Similarly, industry giants disapproved of the new rule.

 

Nvidia $NVDA said on Monday that the regulation acted beyond the powers, highlighting the White House would strike existing technology in mainstream gaming PCs and consumer hardware.

 

Oracle $ORCL said the rule could become one of the most damaging policies in the US tech industry, shrinking the global chip market for US companies by 80%.

 

Consequently, major chip stocks in the US market fell on Monday. As of the market close, Micron Technology $MU dived 4.31%. Nvidia slid 1.97%. Oracle fell 0.38%.

 

#aichip #usmarket