Strong artificial intelligence server purchases lifted the semiconductor since late 2022. Nvidia (NVDA), up around 15 times since then, will continue to thrive. However, other chip firms need to reckon with China’s response to U.S. tariffs and trade restrictions.
China’s top industry associations warned that Chinese companies should be wary of buying U.S. chips. Their comments may hurt sales of U.S. chips from Nvidia, AMD (AMD), and Intel (INTC) to China.
More worrisome for the industry is China’s ban on the export of critical minerals to the U.S. China will not allow exports of critical minerals, which include gallium, germanium, and antimony. The market’s reaction to the news is mixed. Micron (MU), Nvidia, and Broadcom (AVGO) shares rose slightly. However, Intel, Microchip (MCHP), On Semiconductor (ON), Qualcomm (QCOM), and Texas Instruments (TXN) shares fell.
China might expand its restrictions. It could limit the export of cobalt or nickel. That would disrupt markets beyond the semiconductor sector. Again, markets overcame the initial news. The Dow erased most of its losses yesterday, while the Nasdaq (QQQ) and S&P 500 (SPY) trended higher throughout Tuesday.
Your Takeaway
Markets should take China’s threats seriously. The disruption of key rare metals will hurt the semiconductor markets. Cobalt export limits would hurt the battery market, especially those used in the electric vehicle sector. That could end Tesla’s (TSLA) recent rally.
