Chip Software Stocks Tumble on Report Trump Orders They Stop Selling to China

Shares of semiconductor software companies sank, weighed down by a report that they had been caught up in the Trump administration’s efforts to hamstring China’s ability to develop sophisticated artificial intelligence. 

The Financial Times on Wednesday reported the White House had instructed companies that sell software used to design semiconductors to stop providing their services to Chinese clients. 

Shares of Cadence Design Systems (CDNS) and Synopsys (SNPS) tumbled 10.7% and 9.6%, respectively, on Wednesday. Those companies did not respond to Investopedia’s requests for comment in time for publication.

The report arrived ahead of Nvidia’s (NVDA) report of its latest quarterly financial results, with the chip giant saying it took a substantial financial hit—though smaller than it initially thought—after the White House in early April tightened restrictions on the export of advanced chips to China. Read Investopedia’s full coverage of Nvidia’s results here.

The Trump administration has escalated the Biden administration’s efforts to curb China’s access to cutting-edge semiconductors. Nvidia in particular lost out on some revenue associated with its H20 chips, which it developed specifically to comply with Biden-era restrictions. Competitor Advanced Micro Devices (AMD) estimated it would take an $800 million hit for similar easons.

Nvidia CEO Jensen Huang reportedly blasted U.S. export controls as “a failure” during an industry conference earlier this month. Huang argued the restrictions had encouraged local technology firms to develop sophisticated chips on their own, eroding U.S. firms’ market share without preventing China’s AI prospects.

Trump earlier this month rescinded Biden’s “AI diffusion rule,” which would have expanded export restrictions and tightened existing controls. The administration says it will eventually issue its own rule to prevent US-made chips from reaching China via other countries.