Why Nvidia and Chip Stocks Are on the Rise
ValueWalk | May 08, 2025 12:28PM ET
Semiconductor stocks got a jolt on Wednesday afternoon and the rally continued into Thursday after the Trump administration eased a regulation that impacted the industry.
Specifically, the administration announced that it was rolling back a measure that put restrictions on chip exports. The AI diffusion rule, established at the end of the Joe Biden presidency, was designed to limit how many AI chips countries could acquire from the U.S. without a special license.
The idea, in effect, was to prevent Chinese companies from using shell companies to buy advanced AI chips from U.S. chip manufacturers, thus helping the U.S. maintain its lead in advanced chip innovations.
This rule was set to go into effect on May 15 and while it would protect U.S. interests, it would reduce revenue for AI chipmakers and designers, like NVIDIA (NASDAQ:NVDA) and AMD (NASDAQ:AMD). In the first quarter earnings report, AMD CEO Lisa Su said the company was expecting a $700 million revenue hit in Q2 from the new export controls on China.
But it appears that semiconductor stocks will get some relief.
Rule Was “Overly Complex”
On Wednesday, the U.S. Commerce department said it would rescind the rule, effectively stopping it from going into effect on May 15. The plan is to replace it with a new, less complex rule.
“The Biden AI rule is overly complex, overly bureaucratic, and would stymie American innovation. We will be replacing it with a much simpler rule that unleashes American innovation and ensures American AI dominance,” a spokesperson from the Department of Commerce said, reported CNBC.
There was no timetable on when the new rule would be in place nor were there any details on what it would look like.
But the rescission was cheered by semiconductor firms, including NVIDIA.
“We welcome the Administration’s leadership and new direction on AI policy,” a Nvidia spokesperson said in a statement, reported CNBC. “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.”
Semiconductor stocks on the S&P 500 jumped about 2.7% on Wednesday afternoon after the news was initially reported.
NVIDIA stock jumped 3% on the news Wednesday and opened on Thursday up about 1%, trading at $118 per share. Intel (NASDAQ:INTC) stock rose 4% on Thursday after climbing almost 2% on Wednesday. AMD stock was also trending higher, rising 2% in early trading Thursday after making a similar leap Wednesday.
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