Nvidia, Chip Stocks Gain On Reports Of Softer China Sanctions

Nvidia Corp NVDA stock is up Friday amid reports indicating the U.S. government is set to announce further sanctions on exporting semiconductor equipment and AI memory chips to China, which will be less stringent than the previous ones.

Additionally, the U.S. embargo will focus on Chinese companies that make semiconductor manufacturing equipment instead of the fabrication facilities following protests from Lam Research Corp LRCX, Applied Materials Inc AMAT, and KLA Corp KLAC as the move will enable the U.S. companies to maintain their edge versus international rivals like ASML Holding N.V. ASML and Tokyo Electron Ltd TOELY which have not wholly subscribed to the U.S. sanctions against China.

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The U.S. could announce the fresh semiconductor sanctions by next week, according to Bloomberg, citing sources familiar with the issue.

The fresh restrictions will follow months of negotiations between the U.S. government, allies like Japan and the Netherlands, and American chip equipment makers. The U.S. chip companies, including Nvidia and rivals, had previously urged the government to relax its embargo against China, a key semiconductor market.

Therefore, the U.S. expects to impose restrictions on fewer Huawei Technologies Co suppliers and restrict only two chip factories of Huawei partner Semiconductor Manufacturing International Corp.

However, the new restrictions will affect high-bandwidth memory chip companies like  Samsung Electronics Co SSNLF, SK Hynix Inc, and Micron Technology Inc MU.

The disruption of the semiconductor supply chain caused by the 2020 pandemic in China prompted global countries to consolidate their semiconductor bases and reduce their dependence on China. The U.S. and other countries started luring contract chipmakers like Taiwan Semiconductor Manufacturing Co TSM and Intel Corp INTC with subsidies to manufacture advanced artificial intelligence chips in their U.S. facilities while insisting ally countries like the Netherlands and Japan to impose similar sanctions on China.

The VanEck Semiconductor ETF SMH and iShares Semiconductor ETF SOXX, which represent stocks like Nvidia, Advanced Micro Devices, Inc AMD, Broadcom Inc AVGO, Qualcomm Inc QCOM, Taiwan Semiconductor, Intel and Micron were up about 1% on Friday.

Price Action: NVDA stock is up 1.04% at $136.80 in premarket trading at last check Friday.

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