Uncertainty over the Trump administration's policy on the export of artificial intelligence chips weighed on Nvidia stock and others on Thursday.
News broke late Wednesday that President Donald Trump plans to rescind his predecessor's "AI diffusion rule," which was set to go into effect on May 15. That rule placed further limits on U.S. AI chip exports.
"We welcome the Administration's leadership and new direction on AI policy," Nvidia said in an emailed statement. "With the AI Diffusion Rule revoked, America will have a once-in-a-generation opportunity to lead the next industrial revolution and create high-paying U.S. jobs, build new U.S.-supplied infrastructure, and alleviate the trade deficit."
The AI diffusion rule created three tiers of countries that had different levels of export regulations for AI chips. Some U.S.-friendly countries, including India, Israel, Mexico and Switzerland, faced new export restrictions. However, the Commerce Department indicated it plans to replace the Biden administration rule with its own regulations.
Wall Street analysts speculated that the new rules could be even more onerous. For instance, the White House has considered including AI-processor limits as part of bilateral agreements with individual countries, the Wall Street Journal reported.
"The Biden AI diffusion rules were a clear risk to AI shipment momentum and the Trump administration's decision to scrap this initiative is a clear positive for Nvidia as well as the broader hardware space," Wedbush Securities analyst Matt Bryson said in a client note Thursday. "The question now, in our view, is what alternative will the Trump administration favor."
Nvidia Stock Wavers On News
On the stock market today, Nvidia stock rose 0.3% to close at 117.37. Earlier in the session, it was down 1% to 115.85.
Among AI chip peers, Broadcom stock advanced 1.5% to close at 207.77. Advanced Micro Devices stock climbed 1.3% to 101.70.
Deutsche Bank analyst Ross Seymore said the Trump administration's decision to rescind the AI diffusion rule provided temporary relief for AI chipmakers.
"While the curb has been waived by the Trump administration, it's worth noting that they intend to develop a new rule that would strengthen the control of chips abroad," Seymore said in a client note. "It's difficult to presume whether such a rule would be less or more restrictive."
The Biden and Trump administrations have sought to restrict China's access to U.S.-developed AI chips, both directly or through other countries.
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