Broadcom Inc AVGO shares are trading lower by 2.5% to $879.65 during Tuesday's session. Shares of several semiconductor stocks are trading lower after the Biden administration said it plans to halt advanced AI chip shipments to China.
What Happened?
The U.S. government has implemented new regulations aimed at preventing China from using American AI technology for military applications, per Reuters. These rules impose limits on the export of chips to China, Iran and Russia and also blacklist two Chinese chip manufacturers.
Reportedly, the objective is to curb China's access to chips that could bolster its military capabilities while minimizing negative impacts on its economy, as stated by Commerce Department Secretary Gina Raimondo.
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Why This Matters To Broadcom
Broadcom generates a substantial portion of its revenue from chip sales, including to Chinese customers. If restrictions are placed on chip shipments to China, it can lead to a decline in Broadcom's revenue as its customer base is affected.
The loss of a major market like China can have a significant financial impact on the company.
The semiconductor industry also relies on complex global supply chains. New restrictions on chip shipments can disrupt the supply chain, leading to production delays and increased costs for companies like Broadcom.
This disruption can negatively impact profitability and, in turn, stock performance.
According to data from Benzinga Pro, Broadcom has a 52-week high of $925.91 and a 52-week low of $428.14.
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