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

Jefferies' Christopher Wood has expressed concerns regarding the United States' ongoing restrictions on China's access to advanced semiconductor technology. He believes these measures will ultimately be counterproductive, especially in light of Donald Trump's ambition to position the US as an "artificial intelligence superpower." In his recent commentary, Wood emphasized the importance of an event he referred to as the DeepSeek affair, suggesting it will have significant implications for the US stock market, comparable to Microsoft's notable investment in ChatGPT.

Concerns Over AI Development and Chip Restrictions

Wood noted that the United States Navy's decision to ban DeepSeek, a Chinese AI startup, raises various security and ethical considerations. Trump's administration has moved aggressively to halt certain AI regulations on his first day in office. He aimed to foster private sector investments in AI, pushing for policies that reflect the rapid technological evolution and intense competition posed by China.

Despite previous restrictions on semiconductor exports, Wood pointed out that a notable percentage of Nvidia's banned HBM-based chips still reached China through secondary markets last year. He remarked that as AI becomes more affordable, demand for computation will rise. However, he cautioned that this alone would not immediately restore semiconductor stocks to strong profitability due to issues surrounding pricing power.

Shifts in Market Dynamics Due to AI

Wood conveyed that the emergence of DeepSeek has reversed certain trends in the global AI landscape. DeepSeek, led by Liang Wenfeng, has developed an AI model that competes effectively with established Western firms while offering significantly reduced costs. This breakthrough led to substantial losses for Nvidia and reshaped market perceptions.

Furthermore, the capabilities of DeepSeek's AI technology are reflected in its rapid adoption, as it recently became the most downloaded mobile application across 140 markets, particularly gaining traction in India.

In summary, Wood's analysis suggests a complex interplay between US regulatory measures on semiconductors, the resulting market dynamics, and the challenge posed by emerging AI technologies from China, highlighting the unpredictable future of the tech industry.

Trump, China, Semiconductors