Semiconductor Stocks Rise Amid New U.S.-China Chip Restrictions
Semiconductor companies experienced a significant rise on Monday. Sector stocks outperformed the broader market following the Biden administration's announcement of new restrictions on China’s access to critical chip components and artificial intelligence technology. The Philadelphia Stock Exchange Semiconductor Index surged by 2.9%, marking its largest daily percentage gain in nearly a month, while the Nasdaq 100 Index increased more modestly by 1.1%.
Notable movements in the sector included Intel (NASDAQ: INTC), which rose 5% following the announcement of CEO Pat Gelsinger's departure. Shares of other semiconductor and AI-related companies also saw gains: Taiwan Semiconductor Manufacturing Co (NYSE: TSM) up 5.2%, ARM up 5%, Advanced Micro Devices (NASDAQ: AMD) up 3.5%, and Nvidia (NASDAQ: NVDA) up 0.8%. Companies specializing in semiconductor capital equipment also reported profits: Lam Research (NASDAQ: LRCX) rose 6%, Applied Materials (NASDAQ: AMAT) increased by 4.6%, and KLA Corp (NASDAQ: KLAC) gained 3.1%.
The new U.S. measures aim to hinder China's ability to develop advanced semiconductors and AI systems that could enhance its military capabilities. The Department of Commerce has imposed additional restrictions on the sale of high-bandwidth memory and chip manufacturing equipment. This also applies to equipment produced by U.S. firms abroad. Furthermore, 140 Chinese entities allegedly acting on behalf of Beijing have been added to a blacklist, although their names have not been disclosed immediately.
These rules, which have been under consideration for some time, seek to slow China's progress in the semiconductor sector. They include restrictions on the sale of 24 types of manufacturing equipment and three software tools. These controls apply to both U.S. and foreign companies, utilizing the foreign direct product rule to regulate goods produced abroad using U.S. technology. However, exemptions exist for countries that could implement similar controls, paving the way for allies like Japan and the Netherlands to adopt similar measures.
Commerce Secretary Gina Raimondo commented on the initiative, emphasizing the administration's strategy to address China's military modernization through export controls. The new regulations also target high-bandwidth memory chips that are critical for AI applications, adding to the existing restrictions on advanced logic chips.
Analysts are closely monitoring the situation, with Lynx Equity Strategies highlighting the sector's potential to reach a critical juncture. The full details of the BIS export controls are expected to clarify the impact on individual companies within the semiconductor industry. The initial response to the new restrictions may influence market trends, with some companies potentially benefiting while others may face increased risks.