Nvidia (NDVA) and AMD (AMD) may soon get the green light to sell AI chips to China again, potentially reviving a key growth market.
The US government is reportedly considering loosening export restrictions, which could allow the tech giants to resume sales of some lower-end AI chips to China. This policy shift comes after April's export ban blocked chips such as Nvidia’s H20 AI accelerator and AMD's MI308.
“This is a game changer,” Dan Ives, managing director of Wedbush Securities, told Yahoo Finance. “Nvidia stands to gain billions in annual revenue from China, and every Nvidia supplier is going to benefit, as well as second and third derivative plays.”
Bank of America (BAC) raised its price targets for Nvidia and AMD to $220 and $175, respectively, in anticipation of license approval. Favorable regulation could boost Nvidia's earnings per share by 5%-7% and AMD's by 3%-5%, its analysts estimate.
But it's not just Nvidia and AMD that stand to gain.
“It's a silver bullet positive for the AI buildout sector,” Ives said.
If China’s cloud and data center buildouts ramp back up, companies like Broadcom (AVGO) and Marvell Technology (MRVL), whose custom chips support AI infrastructure, could benefit. Credo Technology Group (CRDO), a high-speed interconnect supplier, may also see demand rise alongside broader server deployments. All three stocks carry a Buy rating from BofA.
The clearest beneficiaries may be at the heart of chip manufacturing. Taiwan Semiconductor Manufacturing Company (TSMC), which produces Nvidia and AMD’s chips, and Samsung Electronics (SSNLF), a key supplier of high-bandwidth memory, are well-positioned to capture a rebound.
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“If I’m pointing to derivatives, I’m pointing to Samsung and TSMC,” Matt Bryson, managing director of research at Wedbush Securities, told Yahoo Finance. “They’re literally working on the parts Nvidia and AMD are shipping.”
Bryson said that before April’s export ban, Chinese server build activity was the “number one positive inflection” the industry was watching. The momentum stalled in the second quarter, but could quickly return if policy changes are confirmed.
The semiconductor market is rapidly expanding as AI advances. Gaining approval and reopening the key Chinese market, even partially, shifts sentiment across the sector. Nvidia CEO Jensen Huang estimated the Chinese AI market is worth $50 billion.
Still, the exact effect on balance sheets will be hard to pin down in the near term. Nvidia’s first quarter earnings reported a $2.5 billion drop in China revenue and a $4.5 billion inventory write-off. An additional $8 billion loss is anticipated in the second quarter.
