Chip stocks fall as Nvidia, AMD warn of higher costs from China export controls

Chip Stocks Fall as Nvidia, AMD Warn of Higher Costs from China Export Controls

April 16, 2025

By Steven Orlowski, CFP, CNPR

Shares of major semiconductor companies slid on Tuesday after Nvidia and AMD both issued warnings about rising costs and potential supply chain disruptions stemming from tightened U.S. export controls on advanced chips bound for China.

Nvidia (NASDAQ: NVDA) dropped more than 5% in early trading, while AMD (NASDAQ: AMD) fell nearly 4%. The broader Philadelphia Semiconductor Index (SOX), which tracks the performance of leading chipmakers, declined 2.7%, reflecting investor concerns that the latest round of export restrictions could ripple through the industry.

In separate regulatory filings, both Nvidia and AMD disclosed that new U.S. Commerce Department rules will require additional licensing and compliance protocols for exporting AI chips and high-performance GPUs to China and other countries deemed sensitive to national security interests. The companies warned that these changes will result in higher administrative and logistical costs, potential delays in fulfilling international orders, and reduced access to a key growth market.

“The updated export controls will materially affect our ability to serve some of our largest overseas customers,” said Nvidia in a statement. “We expect compliance-related expenses to increase in the coming quarters, and we are evaluating all possible adjustments to our supply chain to mitigate the impact.”

AMD echoed similar concerns, noting that the tighter regulations could delay the rollout of several next-generation chipsets slated for global release later this year. “Our business strategy includes significant international sales, particularly in Asia. While we support national security objectives, the added layers of licensing and export hurdles introduce cost burdens and unpredictability that complicate operations,” the company said.

The Commerce Department’s latest rules are part of a broader U.S. effort to restrict China’s access to advanced computing technologies, especially in the artificial intelligence and defense sectors. These measures, first implemented in 2022 and expanded several times since, target chips that can be used for military applications, supercomputing, or surveillance.

Analysts say the restrictions are likely to further strain relations between Washington and Beijing, while putting pressure on U.S. companies that rely heavily on Chinese demand.

“China accounts for a significant portion of sales for both Nvidia and AMD, particularly in the AI and data center markets,” said Stacy Rasgon, a senior analyst at Bernstein. “Any disruption in that flow — even temporary — can have cascading effects on revenue, R&D budgets, and product timelines.”

Nvidia and AMD have already begun developing lower-performance chips specifically designed to comply with previous export control thresholds, but the latest revisions appear to tighten those parameters further. It remains unclear whether the existing "compliant" chipsets will still be allowed under the new regime.

Meanwhile, competitors such as Intel (NASDAQ: INTC) and Qualcomm (NASDAQ: QCOM) also experienced modest share price declines, as investors digested the broader implications for the sector. While some companies may be less directly exposed to the Chinese AI market, concerns about supply chain complexities and a fragmented global tech environment continue to weigh on sentiment.

“Geopolitical risk is becoming a key driver of valuation in the semiconductor space,” said Jordan Klein, a technology strategist at Mizuho Securities. “Investors are looking at which companies have diversified supply chains, regional hedging strategies, and enough pricing power to absorb the extra costs without hurting margins.”

Despite the short-term market reaction, some analysts believe that U.S. chipmakers may ultimately benefit from increased domestic investment and incentives tied to the CHIPS Act, which aims to boost semiconductor manufacturing capacity in the U.S.

Still, in the near term, Wall Street appears to be bracing for turbulence as tech giants recalibrate their global strategies under the shadow of geopolitics.