So who comes out ahead in the Trump Administration's push for a cut from AI chips sold in China? Wall Street says maybe Nvidia stock, while AMD definitely gets a two thumbs-up.
Nvidia has traded sideways since news broke Monday. On the other hand, AMD is on track for a solid weekly gain. Nvidia shed roughly 1% to close at 181.59 Wednesday. AMD gained 5.4% to close at 184.42.
Nvidia Stock: Why Deal Is Better For AMD
So what's going on?
"I believe investors have been assuming Nvidia can resume selling chips, whereas for AMD it was less certain," D.A. Davidson analyst Gil Luria told Investor's Business Daily.
In other words, the Trump Administration move, while unusual and unprecedented, appears to offer more clarity on the road ahead for Nvidia's main rival in a very important market.
Nvidia dominates the fast-growing and increasingly critical AI chip market, but AMD has emerged as a formidable challenger.
But AMD has grappled with challenges lately. The company last week reported in-line quarterly results that sent its stock falling. AMD's results were negatively impacted by the U.S. government's export control restrictions.
China Warning
AMD may also be getting a lift from another twist in the U.S.-China trade dispute following news of the Trump Administration's demand for a cut in AI chip sales.
Beijing has reportedly discouraged Chinese organizations, including government agencies, from using Nvidia AI chips, citing national security concerns. Chinese state media said Nvidia's H20 chips might contain "backdoors" that would allow remote access and control and potentially contain a "kill switch." Nvidia has denied those claims.
"H20 is becoming a bargaining chip between China and the U.S. on tariffs," Jefferies analyst Edison Lee said in a client note.
Beijing's response to the Trump Administration's move underscores the sometimes confusing gamesmanship involved in the dispute.
"There is definitely 3D chess being played, especially on the China side," Luria told IBD. "My interpretation is that China wants to get as many chips as possible right now while it ramps up its domestic suppliers. They are legitimately concerned about the tracking the U.S. is installing in Nvidia equipment and will be pushing back on that."
Lee of Jefferies echoed the view that the recent tit-for-tat is all about jockeying for a stronger position in negotiations.
"The U.S. lifted the ban on H20 as a 'concession' to China, which China wanted to signal as 'the Wrong Answer,'" Lee wrote. "If China shows big demand for H20, it will likely give the U.S. an excuse to pressure China into accepting this as a concession that massively benefits China, and thus potentially weaken China's position at the bargaining table."
