Chinese AI Stocks Fall as Fears Grow Over US Chip Restrictions

Key Facts

Shares of Chinese AI companies listed in Hong Kong fell on Friday, November 13, as investors grew increasingly concerned that the Jensen Huang crisis could prompt Washington to tighten export restrictions on advanced chips. Z.AI fell 10.88%, and MiniMax dropped 8.73%, according to the market snapshot reported by Investing.com, citing Reuters. Tencent also fell 2.71% and Alibaba 2.35% in the same session. The moves came amid a split within the sector, with model developers and technology companies declining while some domestic chipmakers rose. The concern centers on the possibility that Chinese companies will face tighter restrictions on access to Nvidia processors or on renting computing power backed by them.

The decline extended to Hong Kong and mainland Chinese indexes, though their performances were mixed. The Hang Seng Index fell 0.9%, the CSI 300 dropped 0.1%, while the Shanghai Composite Index rose 0.2%, according to the same market snapshot. This followed gains in the main mainland indexes over the previous three sessions. The divergence among the indexes showed that pressure on technology stocks did not prevent Shanghai from posting a slight gain in the session. By contrast, shares of companies whose businesses rely on AI and cloud computing posted larger losses than some broader indexes.

On domestic chips, Chosunbiz reported that Cambricon shares rose more than 25% over five sessions through the morning of November 13. Moore Threads gained 14.8%, while Meta X rose 16.5% over the same period. Those gains underscore the divergence between companies concerned about disruption to access to advanced computing and domestic suppliers that could benefit if restrictions on US alternatives widen. Fund manager Wu Zhou said the market fears Nvidia may reduce its purchases from Chinese suppliers following Huang's resignation. He added that tighter restrictions on access to chips or on renting external cloud computing would hurt Chinese AI companies and benefit domestic chipmakers.

AI model developers and cloud service providers in China rely heavily on Nvidia's high-performance chips to run large-scale computing, according to Chosunbiz. US export restrictions on advanced AI chips date back to 2022, when Washington began limiting Chinese companies' access to the processors. The restrictions later covered the A100 and H100 chips, followed by the A800 and H800 versions designed for the Chinese market, and then the H20. Chosunbiz reported that Chinese companies struggled to secure semiconductors as these models were successively added to restriction lists. This dependence makes access to computing capacity a direct risk for model developers and cloud companies.

Chinese companies are seeking to secure Nvidia chip-based computing capacity at data centers outside China. Chosunbiz, citing Reuters, reported that a large Chinese cloud service provider is discussing reserving this capacity for an extended period. Reuters also reported that Chinese AI companies are trying to rent computing capacity backed by Nvidia chips overseas, fearing developments related to Huang could prompt Washington to tighten restrictions on their remote use. This puts overseas data centers at the center of the debate, as companies seek to maintain access to the processors even when they are not inside China. But a US bill under consideration in Congress aims to regulate Chinese companies' use of US chips through overseas data centers.

US House Speaker Mike Johnson said on Thursday that consensus in Congress was growing around limiting chip exports to China, Reuters reported. Bills still under consideration include the AI Monitoring Act, the Chip Security Act and the Remote Access Security Act. The last bill aims to regulate Chinese companies' use of US chips through overseas data centers, directly linking the legislative debate to efforts to rent computing capacity outside China. Gavekal Dragonomics said the biggest risk to China's AI sector is that the crisis could lead to tighter US export controls on advanced chips and the equipment used to manufacture them. That could happen before the end of the year, the firm said.