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According to a Wall Street strategist, the potential implementation of new US restrictions on the export of AI chips to China is rapidly evolving into a significant issue of geopolitical economic warfare. Reports suggest that the US Commerce Department is considering imposing additional export limitations on cutting-edge semiconductors with artificial intelligence capabilities, which would have far-reaching implications for China’s economic growth and military advancements.
Ted Mortonson, the technology desk sector strategist at Baird, emphasized the dual nature of the proposed restrictions, stating that they not only target future economic growth but also possess critical military implications, given the importance of AI in modern warfare. In an interview with Yahoo Finance, Mortonson noted, “Whenever we restrict the economic sovereignty of a country, it becomes a pretty big red line [for China].”
These potential restrictions would supplement the measures announced last year, which targeted machinery used in advanced chip manufacturing and certain AI-specific circuits like Nvidia’s A100 and H100. Mortonson admitted the uncertainty surrounding the extent of these restrictions, but stated, “It’s very obvious it’s now become an economic policy to not let China have our most advanced silicon technology.”
The implications of such measures extend beyond the semiconductor industry, which has experienced substantial growth due to AI-related developments. Investors have flocked to companies like Nvidia and AMD, driving their stock prices up. However, Mortonson cautioned that China accounts for 25% to 30% of the total revenue exposure for both firms, potentially posing a headwind to their core growth.
While the reaction of China remains uncertain, Mortonson predicted that retaliatory actions from Beijing against US companies should be expected. Given China’s significant control over the supply of various products into the US, he warned that they would not hesitate to strike back in other ways, targeting major US businesses. The situation continues to evolve, raising concerns about the intensification of economic conflicts in the realm of AI chip exports.
