Artificial intelligence-linked stocks are in the spotlight again as investors try to gauge where the market goes next after the tariff induced panic subsided.
Stocks saw another wobble yesterday after the top AI chip company Nvidia revealed it would have to write down $5.5bn due to export controls on AI chips being sold to China.
This put the brakes on what had been a mildly positive week for equities, as the high volatility following the Rose Garden tariff announcement on 2 April began to subside.
With the tech giants accounting for such a large chunk of the S&P 500 and Nasdaq, further clarity on where the AI linked companies stand in relation to tariffs and export controls will be an important determining factor in overall market sentiment over the coming weeks.
Richard Clode, portfolio manager on the Global Technology Leaders team at Janus Henderson Investors, said: “Looking forward, the debate now turns to the AI diffusion rule that is supposed to come into effect on the 15 May.
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“There has been a concerted campaign by Nvidia and all the hyperscalers to push President Trump to water down or rip up this regulation from late in the Biden administration. The argument is this will impinge on America’s ambitions for global AI supremacy and would give a tailwind to global competitors filling the void.
“Seven Republican senators wrote a letter to Secretary of Commerce [Howard] Lutnick this week making that point,” Clode continued. ”With broader US corporate and political support lobbying for changes, this has a higher chance of being watered down.
“There is also speculation that Nvidia announcing $500bn of AI supercomputer production in the US this week, after receiving the letter on the H20 export licence, was some sort of quid pro quo for defusing the diffusion rule threat. Albeit that remains speculation at this juncture, and it goes without saying the situation remains very fluid.”
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“Nvidia CEO Jensen Huang’s visit to Beijing just days after Washington imposed fresh curbs on AI chip exports is a clear sign that President Trump’s trade strategy is a masterclass in the law of unintended consequences,” said deVere Group CEO Nigel Green.
“Huang’s surprise trip, at the invitation of a government-linked Chinese trade group, came immediately after the US administration suddenly blocked the export of Nvidia’s H20 chip – a model specifically designed to meet previous US restrictions.
“Nvidia had expected the chip to remain eligible for sale in China following discussions between Huang and President Trump earlier this month.”
Green noted the AI chip giant has warned of a $5.5bn earnings hit as a result of the restrictions, with major Chinese clients including Alibaba, Tencent and ByteDance ‘left in limbo’. But the financial damage goes far beyond a single company, he added.
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