Nvidia shares boosted as Trump ditches AI chip ban
Leading chip maker Nvidia’s stock rose 3.1 per cent to $116.99 (£92.80) on Wednesday, as Trump administration plans to rescind the Biden-era’s ‘AI diffusion rule’ came to light – a rule which restricts exports of advanced chips used in AI.
The Philadelphia Semiconductor Index lifted by 1.7 per cent accordingly, and there was a 1.7 per cent uptick for AMD shares.
Bloomberg first revealed that Trump’s administration intends to ditch the framework, originally scheduled to take effect on 15th May, that divvied up countries into three tiers with various levels of access to US chips.
While restrictions on China will remain untouched, or perhaps even tighten, the reversal shows signs of a more flexible and diplomatic approach.
Nvidia, whose global sales have widely been impacted by Biden’s restrictions, welcomed the move: “We welcome the administration’s leadership and new direction on AI policy”, the firm stated.
“With the AI diffusion rule evoked, America will have a once in a generation opportunity to lead the next industrial revolution”.
A fragile recovery?
Commerce Department officials, while backing the announcement, remained blunt in their response.
“The Biden AI rule is overly complex, overly bureaucratic, and would stymie American innovation”, a spokesperson said.
“We will be replacing it with a much simpler rule that unleashes American innovation and ensures American AI dominance.
Russ Mould, investment director at AJ Bell, framed the change as both pragmatic and strategic.
He said that “there is now the view that China seems to be capable of developing its own technological capabilities, so perhaps trump has taken the view that it’s better to make money by selling US products to China”.
Despite the rally, Nvidia’s outlook remains cautious. Its stock recently triggered a so-called “death cross”, with its 50 day moving average of $127.38 falling below its 200 day – a sign analysts have dubbed as bearish, and often linked to long term weakness.
The shares are sitting below both levels, showing a fragile recovery, unless Trump’s announcement triggers sustained buying.
While some curbs targeting China will stay in place, Trump’s team could introduce new ones targeting diversion hotspots like Thailand, according to Bloomberg.
This could preserve pressure on Beijing while allowing exemptions to other countries seen as allies, or commercial partners.