Pending U.S. trade restrictions are a major overhang on AI chip stocks, including Nvidia.
Chipmakers already face strict limits on the technology they can sell to China, but new regulations set to take effect May 13 will set up further roadblocks. Those new regs are the "AI Diffusion Rules" issued in the waning hours of the Biden administration on Jan. 13.
"The big overhang on the chip space is really the view that Trump may keep all or most of Biden's cumbersome 'AI Diffusion Rules,' which add layers of oversight, bureaucracy, and limitations on sales of AI chips — even to our friends," Melius Research analyst Ben Reitzes said in a client note Monday.
Those rules are meant to further limit China's access to artificial intelligence computing technology. But they could end up pushing some U.S. allies closer to China, Reitzes said.
The AI Diffusion Rules are "a cloud that needs to clear" for Nvidia stock and others, Reitzes said.
"While AI Diffusion Rules shouldn't slow Nvidia in calendar year 2025, beyond that it is much tougher to answer," he said.
President Donald Trump had previously called some of his predecessor's AI policies "harmful" to the U.S. tech industry and "America's global AI dominance."
The Trump administration has sought industry input for its Artificial Intelligence Action Plan. That plan is due in late July.
Nvidia Stock, Others Impacted By AI Trade Rules
"The real issue here is whether the Trump team can think of anything better in order to limit China's access to AI compute (both from the cloud and on premise)," Reitzes said. "Many expect a response from Trump ahead of the May deadline — and we believe the administration is consulting with Nvidia this time. However, we wouldn't be surprised if the administration maintained a hardline stance to limit China's capabilities around the world. The uncertainty isn't helping semis, especially Nvidia."
Senior foreign officials and technology companies are asking the Trump administration to rethink the country's chip export restrictions, Bloomberg reported Tuesday. Several governments and companies are now trying to persuade Trump's team to loosen the "AI Diffusion Rules" before the deadline for compliance arrives.
On the stock market today, Nvidia stock sank 0.6% to close at 120.69. Other AI chip stocks impacted by the U.S. trade restrictions include Advanced Micro Devices, Broadcom and Marvell Technology.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
