U.S. policy establishes new requirement that Intel obtain government license before selling advanced processors to China.

The semiconductor industry is experiencing significant disruption as U.S. trade policies tighten under President Donald Trump's administration. Intel announced that it will now require licenses to sell certain advanced artificial intelligence processors to Chinese clients, according to a Financial Times report. This development reflects broader restrictions affecting the sector, with Nvidia warning of a $5.5 billion revenue hit due to export limits on its China-tailored H20 AI chip. The Dutch chip equipment manufacturer ASML Holding has also expressed concerns about its future outlook, highlighting growing uncertainty in the global chip market.

Intel, under new CEO Lip-Bu Tan, specified that chips exceeding a total DRAM bandwidth of 1,400 gigabytes per second, an input-output bandwidth of 1,100 gigabytes per second, or a combined total of 1,700 gigabytes per second will need export licenses for China. The company's Gaudi series, designed for AI workloads, surpasses these thresholds, as does Nvidia's H20 chip. These performance-based measurements aim to create a clear boundary between consumer-grade chips and those with strategic significance. The policy shift is part of a broader U.S. strategy to limit the flow of advanced semiconductors that could enhance China's military and technological capabilities, particularly by slowing China's AI development, which depends on high-performance chips for training large-scale models.

Market reaction has been swift and severe, with Intel's shares dropping 3.12% to $19.23 on Wednesday as investors reacted to the semiconductor industry's exposure to U.S.-China trade frictions. The AI chip market, which enjoyed a two-year surge driven by demand for AI infrastructure, is now cooling as tariff threats and concerns over reduced spending by major technology companies weigh on sentiment. Companies like Microsoft and Amazon, major buyers of AI chips, are reportedly adopting a more cautious approach to data center investments due to rising costs and trade uncertainties.

These export restrictions expand on measures first introduced during the Biden administration to block advanced AI chips from being used in Chinese military applications. The restrictions risk disrupting the global supply chain, as China is a major market for U.S. chipmakers accounting for a significant portion of their revenue. ASML's cautious outlook underscores the ripple effects of U.S. policies, as its lithography machines are critical for producing the affected chips. Chinese firms like SMIC may face barriers to acquiring advanced equipment, potentially accelerating their efforts to develop domestic alternatives such as Huawei's Ascend chips, though these currently lag behind U.S. offerings in performance.

For investors, the environment remains fraught with uncertainty. Trump's trade policies, including potential future tariffs on semiconductors, could further increase costs for U.S. firms reliant on global supply chains, particularly those involving Taiwan and South Korea. While the White House has temporarily exempted some semiconductor imports, the threat of targeted tariffs looms. As the U.S. continues to prioritize technological dominance, Intel and its peers must navigate a complex landscape where innovation, profitability, and geopolitics intersect.