MW Is it safe to get back into chip stocks? Some investors think so, but here's what they should keep in mind.

By Therese Poletti

Investors in semiconductor stocks may feel relieved at the prospect of less sweeping tariffs - but there's another policy issue to think about

Many semiconductor stocks were rallying on Monday, and Advanced Micro Devices Inc. was among the biggest gainers on reports that the Trump administration may narrow the scope of some of its planned tariffs.

Chip stocks are outperforming the broader market, with the Philadelphia Semiconductor Index SOX up 3% and all of its components in positive territory. AMD's stock has struggled in recent months, but it's one of the chip sector's leading advancers Monday: It's up 7.1% and is heading for its best day since Feb. 29, 2024, when it rose 9.1%.

Does Monday's rally in chip stocks signal that it's time for investors to wade back in, especially if President Donald Trump moves to advance tariffs that aren't as wide-ranging as once expected? The answer is complicated, because there's another issue that could crimp the sales of some artificial-intelligence chips.

Ben Reitzes, an analyst with Melius Research, said in a note to clients that currently the biggest question hanging over many semiconductor stocks is how Trump will deal with restrictions on exports of AI-related chips that were issued in the last weeks of the Biden administration.

"The big overhang on the chip space is really the view that Trump maykeep all or most of Biden's cumbersome 'AI Diffusion Rules,' which addlayers of oversight, bureaucracy and limitations on sales of AI chips - evento our friends," Reitzes said in a note to clients on Monday. He added that it is possible Trump will keep the stringent approach.

This issue is a particular thorn in the side of Nvidia Corp. $(NVDA)$, he noted.

"The real issue here is whether the Trump team can think of anything better in order to limit China's access to AI compute," Reitzes said, noting that the regulations will go into effect on May 13 unless the Trump administration steps in. "However, we wouldn't be surprised if the administration maintained a hardline stance to limit China's capabilities around the world. The uncertainty isn't helping semis, especially Nvidia."

Last month, Microsoft Corp. $(MSFT)$ became another vocal opponent of the policy, with Brad Smith, the company's vice chair and president, penning a blog post advocating that the Trump administration review rules that the company deems overly restrictive. "Namely, the Biden rule goes beyond what's needed. It puts many important U.S. allies and partners in a Tier Two category and imposes quantitative limits on the ability of American tech companies to build and expand AI data centers in their countries," Smith wrote.

Reitzes noted, however, that he does not expected Broadcom Inc. $(AVGO)$ or Marvell Technology Inc. $(MRVL)$ to be seriously affected by the restrictions.

Broadcom's "chips to [TikTok parent] ByteDance are below thresholds and its other material AI customers are U.S.-based," Reitzes said.

When it comes to AMD, Reitzes said things are looking better for its AI-accelerator chip family after the company saw a recent purchase from Oracle Corp. $(ORCL)$, which said in its most recent earnings call that it signed a "multibillion-dollar contract" for 30,000 of AMD's MI355X graphics processing units for its new data centers.

"The Oracle purchase could be the start of a broadening relationship intothe launch of the MI400 in [calendar 2026]," he said, referring to a future generation of AMD accelerators.

-Therese Poletti

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March 24, 2025 13:24 ET (17:24 GMT)

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