Semiconductors smoked as Nvidia plunges most since 2020 on Chinese chip ban

Sep. 01, 2022 12:31 PM ETNVIDIA Corporation (NVDA), AMD, MU, QCOMINTC, TXN, ADI, MRVL, TSM, MCHP, ON, SFTBYBy: Chris Ciaccia, SA News Editor117 Comments

Microprocessors on a dark background

Andrei Berezovskii

Semiconductor stocks fell sharply on Thursday, as Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) both said they had received warnings from the U.S. government to curb sales of some products from China to Russia.

On Wednesday, Nvidia (NVDA) filed an 8-K that said the U.S. government "indicated that the new license requirement will address the risk that the covered products may be used in, or diverted to, a ‘military end use’ or ‘military end user’ in China and Russia."

AMD (AMD) said it did not see a material impact from the restriction, but did confirm to Bloomberg that it had received the same requirement.

On Thursday, however, Nvidia (NVDA) said the U.S. government had authorized exports of its H100 integrated circuits, while also allowing order fulfillment and logistics of its A100 and H100 integrated circuits through the company's Hong Kong facility through September 1, 2023.

Nvidia (NVDA) shares fell their most since March 2020, declining nearly 12% to $132.90 in mid-day trading, while AMD (AMD) was off 7% on the news.

Taiwan Semiconductor (TSM) produces chips for both Nvidia (NVDA) and AMD (AMD), but TF International Securities analyst Ming-Chi Kuo said the U.S. government's ability to limit restrictions on suppliers is "limited."

"The impact of the sales restriction on suppliers such as TSMC is limited, but investors worry US [government] may expand restrictions on more chips which could affect more server-related or other products," Kuo explained. "This uncertainty could be a structural risk for the semiconductor sector."

Marvell Technology (MRVL) and Intel (INTC), which both compete with Nvidia (NVDA) and AMD (AMD), declined nearly 6% and 2%, respectively.

Micron Technology (NASDAQ:MU) shares fell more than 2% even as the company said it had committed to a $15B investment to build a new fab for leading-edge memory manufacturing in Boise, Idaho.

The company said it would be the first new memory manufacturing fab built in the U.S. in 20 years and would supply chips for the automotive sector, data centers and other markets.

Qualcomm (NASDAQ:QCOM) fell more than 4% to $126.55 as investors grappled with the fallout that Arm, the chip licensing firm owned by SoftBank (OTCPK:SFTBY), is suing Qualcomm over a licensing disagreement.

The lawsuit alleges that designs used by Nuvia, which Qualcomm (QCOM) purchased last year, cannot be transferred without permission.

"Arm has no right, contractual or otherwise, to attempt to interfere with Qualcomm’s or NUVIA's innovations," a Qualcomm spokesman told Seeking Alpha. "Arm’s complaint ignores the fact that Qualcomm has broad, well-established license rights covering its custom-designed CPUs, and we are confident those rights will be affirmed.”

Several other chipmakers also declined on Thursday, including Texas Instruments (TXN), Analog Devices (ADI), ON Semiconductor (ON) and Microchip (MCHP), all of which fell 1% or more.

Last week, UBS said both Nvidia (NVDA) and Advanced Micro Devices (AMD) have seen "consistently lower pricing" for their GPUs over the past few months, but the rate of decline has slowed down.

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