Chinese Stocks See Broad Rally As US Eases Chip Curbs
U.S.-listed Chinese stocks, including tech giants Alibaba Group Holding (NYSE:BABA), PDD Holdings (NASDAQ:PDD), JD.com (NASDAQ:JD), and Baidu (NASDAQ:BIDU), experienced significant gains on Tuesday.
This surge followed the U.S. government’s recent decision to lift certain chip export restrictions to China. The positive sentiment also extended to Chinese electric vehicle companies like NIO (NYSE:NIO), Li Auto (NASDAQ:LI), and XPeng (NYSE:XPEV), which saw strong upward momentum.
For some time, Washington had slapped multiple semiconductor restrictions on China, severely limiting its access to advanced semiconductor technology. These measures were enacted citing national security concerns, aiming to curb China’s technological advancement in critical areas.
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Amidst these developments, graphics processing unit (GPU) giant Nvidia (NASDAQ:NVDA) made a pivotal announcement on Monday. The company confirmed it would restart sales of its H20 GPU in China and also launch a new RTX PRO graphics chip specifically designed for Chinese customers.
Nvidia CEO Jensen Huang stated that the company is actively submitting applications to resume H20 shipments, and the U.S. government has provided assurances that these license approvals will be granted, with deliveries expected to commence soon.
Furthermore, Huang introduced the RTX PRO GPU, which is fully compliant with U.S. export rules and is tailored for AI-powered digital twins in smart factories and logistics applications. This move underscores Nvidia’s strategic efforts to maintain its competitive edge in the crucial Chinese market despite stricter trade policies.
Previously, the U.S. had broadly prohibited China from accessing technology from key semiconductor companies such as Nvidia, Taiwan Semiconductor Manufacturing Co. (NYSE:TSM), ASML Holding (NASDAQ:ASML), and Micron Technology (NASDAQ:MU).
These semiconductor chips are fundamental components for virtually every modern electronic device, ranging from smartphones to advanced electric vehicles.
In 2024, Joe Tsai, co-founder and chairman of Alibaba, publicly stated that China lagged behind the U.S. by approximately two years in AI development.
He attributed this significant gap largely to the U.S. technology restrictions. In a podcast interview, Tsai explained that Washington’s export curbs had limited Chinese firms’ access to advanced chips like Nvidia’s GPUs, which in turn severely hampered Alibaba’s cloud business and its ability to provide top-tier computing services to its clients.
The U.S. chip companies, recognizing the substantial portion of their revenue generated from the Chinese market, had been actively lobbying the U.S. government to ease these restrictions.
Their arguments highlighted the detrimental impact of the bans on their financial performance. As a direct consequence of the export ban on H20 products to China, which came into effect on April 9, Nvidia notably booked a $4.5 billion charge in its first quarter, reflecting the significant financial hit.
Looking ahead, Nvidia CEO Jensen Huang is reportedly slated to attend the opening ceremony of China’s International Supply Chain Expo in Beijing on Wednesday.
Prior reports had indicated that Huang was preparing for an important diplomatic trip to China, where the company intended to introduce a new, scaled-down AI chip that adheres to U.S. export regulations.
According to the Financial Times, this new chip is a modified version of the Blackwell RTX Pro 6000, designed with certain advanced features, such as high-bandwidth memory and NVLink, excluded to comply with the restrictions.
Nvidia reportedly plans to debut this China-specific AI chip as early as September. Sources familiar with the matter also noted that Huang aims to meet with top Chinese officials, including Premier Li Qiang and Vice Premier He Lifeng, during his visit to the International Supply Chain Expo next week in Beijing.
Price Action: BABA stock is trading up 5.66% to $114.35 premarket at last check Tuesday.
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