Trump's Chip Curbs On China To Be Counterproductive, Says Jefferies' Christopher Wood

The ongoing U.S. efforts to limit China's access to advanced semiconductor technology are likely to be ineffective, according to Christopher Wood of Jefferies. This stance comes amid former President Donald Trump's push to elevate the U.S. status as an 'artificial intelligence superpower.'

The Impact of the DeepSeek Affair

In Wood's recent analysis, he stated that the situation surrounding DeepSeek, a Chinese AI startup, may become one of the most crucial events in the U.S. stock market since Microsoft's investment in ChatGPT.

This incident highlights a key concern for the U.S. Navy, which has opted to ban DeepSeek due to security and ethical issues. These developments are pivotal, especially since they emerge against a backdrop of increasing competition in AI between the U.S. and China.

Trump's AI Policy and Its Consequences

On the first day of his presidency, Trump took steps to halt key safety and transparency protocols for AI developers, aiming to stimulate private sector investments in this essential technology. He emphasized the importance of U.S. dominance in rapidly advancing technologies that are fiercely contested by China.

Despite previously imposed restrictions, Wood reports that around 10% of NVIDIA's restricted HBM-based chips ended up in China last year through secondary channels. This indicates that demand for AI technology continues to grow, even if access is more limited.

Wood points out that while the increased accessibility of AI technology might drive demand for computational power, it doesn't automatically suggest that semiconductor stocks will reach peak values again. This is primarily due to ongoing concerns regarding pricing power.

Market Trends and AI Disruption

Current market sentiments suggest that investors believe purchasing tech hardware is a more favorable option than selling. Wood notes that the semiconductor index has lagged behind three out of the four major hyperscalers.

The DeepSeek affair serves as a stark reminder of the potential disruptions AI presents within the industry. Founded by Liang Wenfeng, a head of a quant fund, DeepSeek's latest AI model has garnered attention for offering performance levels comparable to leading Western AI firms, but at a significantly lower cost. This competitive edge has resulted in substantial losses for NVIDIA.

As DeepSeek's AI assistant emerges as the most popular mobile app across 140 markets—with India seeing the highest percentage of new users—questions arise about whether similar innovations can be expected to come from other regions, including India.

Trump, China, AI