Nvidia, AMD Fall on China Chip Rejection; US Export Policy Uncertainty Weighs

The semiconductor sector faced unexpected headwinds Friday when reports surfaced that China has rejected advanced Nvidia chips, despite the US Department of Commerce approving H200 exports to ten Chinese companies. This contradiction, approval from Washington but refusal from Beijing, exposed a key fragility in the AI supply narrative that has powered mega-cap tech gains over the past six weeks. Nvidia fell 2.2%, AMD dropped 3.3%, and Broadcom, along with other semiconductor names, retreated as traders reassessed China exposure.

The broader context matters. During President Trump's two-day summit with Xi Jinping in Beijing that concluded Friday, no major semiconductor deals were announced, contrary to earlier hopes. Trump focused instead on trade and rare earths, with China pushing back on both US pressure and technology transfer demands. Meanwhile, news also broke that the US is doubling down on domestic rare earth production, acknowledging that China has cornered a $1.2 trillion supply chain vulnerability. This dual message, we're opening some trade channels while building alternative supply chains, created confusion about the long-term demand picture for advanced chips sold to China.

The selloff reflects a repricing of what 'normalization' actually means. Traders had assumed that US approval of H200 and other advanced chip exports to China would unlock enormous semiconductor demand growth, especially for data center and AI applications. But Beijing's rejection signals that China's policy is to minimize reliance on US chips and accelerate domestic alternatives. This creates a two-tier market: mature node demand may still flow to US suppliers, but leading-edge capacity will be stewarded toward Chinese firms like SMIC and local AI accelerator makers. The Street was caught flat-footed.

The debate now centres on whether this is a temporary signal or a strategic pivot. Sceptics note that during Trump's visit, Boeing appeared to secure a major aircraft order from China, suggesting some trade normalization is real. But semiconductor insiders point out that chip supply chains have multi-year inertia; once China commits to self-sufficiency in advanced nodes, the US has limited leverage. The selloff in semiconductors on Friday reflected this uncertainty, with analyst commentary shifting from 'China demand is a growth driver' to 'China demand is a tail risk to US semiconductor margins.'