The chip sector melted down Friday for its third 6% one-day drop of the year after U.S. regulators moved to pump the brakes on China’s military ambitions as it issued wider restrictions on semiconductor and AI technology that can be sold to the world’s second-largest economy.
On Friday, the U.S. Department of Commerce expanded its list of chip technology that requires a license to be sold to China — essentially a euphemism for a ban if the license can be denied — and the PHLX Semiconductor Index SOX,
News of the ban was served fresh on the back of Advanced Micro Devices Inc. AMD,
Friday’s drop is only the worst one-day drop on the SOX index since Sept. 13, when it dropped nearly 6.2%. In fact, Friday’s fall is merely the third worst one-day performance of the year for the SOX index with June 16’s fall of just over 6.2% ranking the worst, according to FactSet data.
Nvidia shares melted down last month when the graphics processing unit maker disclosed the list of products that needed a license to sell to China, primarily the company’s A100 and H100 data-center AI technology, and estimated a potential $400 million hit in expected third-quarter revenue if licenses were denied. The ban just added to Nvidia’s bleed-out year as it has cut its outlook not just once, not just twice, but three times. Still the largest U.S. chip maker by market cap, Nvidia finished Friday with a $304.2 billion cap.
Bans of chip technology to China are nothing new: A little more than two years ago, a ban focused on the machines needed to make silicon wafers into finished chips, equipment made by companies like Lam Research Corp. LRCX,
Elsewhere in the sector, shares of Intel Corp. INTC,
As for the third-party fabs that produce the silicon wafers that become microchips, shares of Taiwan Semiconductor Manufacturing Co. TSM,
Over the course of 2022, the SOX index has fallen 40% on the year, with shares of both AMD and Nvidia in a freefall of nearly 60%, while the S&P 500 index SPX,