U.S. Stock Futures Decline as Reports of New Ban on AI Chip Sales to China

Nasdaq 100 futures showed a downward trend on Wednesday following reports that the Biden administration is contemplating restrictions on the export of AI chips to China, including those manufactured by Nvidia, a company based in Santa Clara, California.

The technology sector led the decline in U.S. stock index futures after news emerged of a potential ban on the export of AI-related products to China. The dip was particularly notable in Nasdaq futures, which affected the overall market rally. Traders had welcomed positive data on durable-goods orders, home sales, and consumer confidence on Tuesday, but the report of a potential AI chip ban overshadowed the recent optimism.

The ban’s potential impact on Nvidia, which generates 20% of its revenue from China, was highlighted, with even lower-end chips that don’t require an external export license potentially being included. As a result, Nvidia’s stock dropped 3.2% in premarket trading, while Advanced Micro Devices, another AI chip manufacturer, saw a decline of 2.8%.

The market will also be closely monitoring the European Central Bank’s annual forum on central banking, where comments from Federal Reserve Chair Jay Powell and other central bank heads may influence market sentiment, particularly regarding the outlook for higher borrowing costs and inflationary pressures. Despite recent declines, some analysts remain optimistic about further gains in the market based on the recent rally and positive performance in various sectors.