President Biden ramping up China export restrictions, analysts slash semiconductor estimates

Yahoo Finance Live anchors discuss reports that President Biden is ramping up China export restrictions.

Video Transcript

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JULIE HYMAN: Here's another area where we have actually seen supply sort of shift interestingly. It could shift further-- the US reportedly planning to further restrict China's access to advanced chip technology. This is according to a Reuters report, which said the Biden administration will broaden its curbs on US shipments of semiconductors next month, specifically on those used for artificial intelligence and chip making tools.

So this is pretty specific here. We're not talking about a blanket ban on US chip technology made in China but just on the sort of ones that are seen as creating some security vulnerabilities. And we're not seeing a huge reaction in the chips this morning, because they've already done pretty poorly. But we are seeing a little bit of reaction, certainly some chatter into what kind of effect it's going to have on the businesses.

- Yeah. For Nvidia specifically, that could actually mean an impact of about $400 million. They had actually acknowledged the letter that they did receive from the government. And this is really gonna hit some of their A100 chips. And so that potentially could really impact some of the forecasts.

And Nvidia already had been impacted by some of the forecasts in this most recent earnings period, too, where they had to come out, revise some of the guidance, and then additionally come out and then put the actual report in front of the Street for them to digest-- still continued to move lower.

And so with that, it's really kind of perhaps some of the relief that they're still being able to-- with much of this perhaps priced in at this point, they're moving higher premarket by about 3/10 of a percent. But it's really this sense of how much this is actually gonna continue to impact specific products like the A100 and H100 products, those graphics processing units that they sell to businesses.

- Yes. And back to your point, Julie, this is an industry group that has just been beaten up year to date. I'm looking at a chart of Nvidia on the Y-Fi Interactive here. We can see it's down 35% over the one-year period.

And you take a look at the year to date, it's gonna capture that high a little bit better-- basically been cut in half this year. And then you take a look at everything else that's going on this morning. I do have a little bit of analyst commentary about this latest move.

But I just wanted to show you, here is a year to date look. All right. We've got some big movers there.

Let me just take off these extended-hour quotes so you can see more clearly-- Taiwan Semi down a third of its value, Nvidia down over half, as we were talking about. And this is only year to date. You take a look at off the 52-year high-- 52-week high stats-- let's go back here, and we can see the numbers get a little bit bigger there.

So let me get to some of that commentary. First of all, this latest move is, I don't think, anything particularly new. And as you said, it's not wide sweeping. But here's what Wells Fargo is saying on the matter. "We'd expect restrictions to remain focused on limiting China's leading edge semiconductor effort." Investors "will likely view additional restrictions as a negative." That's coming from Wells Fargo.

Citi saying, "We continue to believe the group bottoms in September/October with expanded China restrictions the last bit of WFE bad news."

And then, finally, Morgan Stanley saying, the government may simply codify issues companies are already aware of. So I'm gonna skip the rest of that because I do want-- unless you have anything else to say here, guys--

JULIE HYMAN: Well, I have one more thing on chips because we were just talking about how the earnings estimates have come down for the S&P 500. If you look at tech more specifically, they've been cut more for semiconductor companies than for tech more broadly, which is interesting. But semiconductor companies have been coming out and making negative commentary.

- Yeah.

JULIE HYMAN: And so that makes sense here. But if you look at earnings for chip-related companies in the S&P, the estimates are for earnings to be flat or unchanged in 2023. Expectations were 12% growth just three months ago. And you can see profits for tech more broadly are still expected to go up by 6%-- so pretty dramatic here, what we're seeing.

- Just a brief add-on here-- the timing of all of this, too. According to the Reuters sources here, they're expecting that there are going to be a series of rules, perhaps an overarching rule, prior to the midterm election as well-- so the timing here significant, as well as when this would actually start to impact some of the forecasts that the companies that we're discussing, all of these chip manufacturers, what that exactly means for their revenue and some of their margins as well.

- Yeah, and we've seen some of the analyst forecasts come down, not as much as I think people were expecting, but we're kind of in a low bar situation, the same we've been in with previous quarters. So I can kind of flip a coin and see this going either way, especially according to the sector.