US chip stocks gain on report China export controls better-than-feared

Investing.com -- US semiconductor stocks are on the rise in premarket trading after reports suggested that the Biden administration's anticipated export controls on China may be less stringent than initially feared.

The iShares Semiconductor ETF (SOXX) gained 1%, with leading chipmakers Nvidia (NASDAQ:NVDA ) (+1.7%), AMD (NASDAQ:AMD ) (+1.1%), Broadcom (NASDAQ:AVGO ) (+0.6%), ASML (AS:ASML ) (+1.3%) and Texas Instruments (NASDAQ:TXN ) (+0.7%) posting early gains.

According to reports from Bloomberg and Wired, the new restrictions are expected to focus on companies producing semiconductor manufacturing equipment rather than the broader chip fabrication sector.

This softer approach includes fewer Huawei suppliers being added to the entity list and excludes major DRAM manufacturer CXMT from direct sanctions.

Analysts see the developments as a relief rally for the oversold semiconductor sector.

JPMorgan noted that the immediate reaction in Asia highlighted optimism, although hedge funds quickly shorted the move.

"We see Europe semis bounce this morning on a BUY the news mantra on what appears to be softer restrictions however it will be interesting to see if HF's fade the move or whether it has legs," JPMorgan commented.

The bank pointed out that while current measures appear moderate, potential future actions under a Trump administration add complexity to the market outlook.

"Trump's narrative certainly adds a layer of complexity here," they added.

Citi analysts echoed this cautious optimism, stating that the initial rally reflects relief over fears of wider sanctions but flagged longer-term concerns about lackluster growth in wafer fab equipment (WFE) sales.

"We believe the fundamental investor concern remains an uninspiring flat to up 2026 WFE setup (China flat to down again assuming ~20-25% China normalized equipment sales & uncertainty around international HBM DRAM spend)," said Citi. "We remain defensive on the group."

Source: Investing.com