# Sector update: Semiconductors

_Today, there is more news in the semiconductor sector that will impact several high-profile stocks in the US and Europe._

Neil Woodford · 18 April 2025 · 2 min read

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Today, there is more news in the semiconductor sector that will impact several high-profile stocks in the US and Europe.

In the US, Nvidia announced in a statement that the US government has imposed new export restrictions on its H20 chips which will effectively ban sales of this chip in China, Hong Kong and Macau over concerns of its potential use in future Chinese supercomputers which could be used in defence and other sensitive applications. In addition, Nvidia announced that as a result, it will take a US$5.5bn write-down on inventory and work in progress this quarter, and analysts are suggesting that the ban would also impact sales in Q2. Sales to China account for approximately 13% of Nvidia’s total revenues. Nvidia’s shares fell on this announcement when the US market opened today, and in Asia and Europe, other semiconductor stocks have fallen in sympathy. The US government’s ban also applies to AMD’s MI308 chip, which is also used in AI applications.

Interestingly, Nvidia had designed the H20 chip, which was released last year, in response to previous restrictions the US government imposed on its ability to sell even more powerful AI chips to China in 2022. The less powerful H20 chips are believed to have helped the Chinese start-up company, DeepSeek, to develop its ChatGPT-beating reasoning AI model, R1.

In an odd coincidence, Nvidia also announced today that it would be investing US$500bn in AI infrastructure in the US over the next four years. Amidst all the consensual doom and gloom about the effects of the Trump tariffs on the US economy, one could imagine that the President may have been rather pleased to hear this news as yet another sign of high-tech manufacturers investing in operations on American soil in the wake of his tariff announcements.

Elsewhere in the sector, ASML, the Dutch-based world leader in advanced chip-making equipment, announced its first quarter numbers for the 2025 financial year. Sales of Euros 7.7bn were in line with guidance, and its gross margin of 54% was slightly above guidance. However, quarterly net bookings (which were much better than expected in Q4 last year) were below expectations. Unsurprisingly, given the level of gloom gripping the sector right now, the shares fell today, but only by 5%.

Despite this challenging news backdrop in the semiconductor sector, which has performed poorly in recent weeks, I continue to believe that the industry is at the start of a cyclical recovery that will not be derailed by Trump’s tariff agenda. Consequently, the lower share prices that now prevail alongside many very low valuations create a very interesting opportunity in the sector, which I will continue to monitor very closely.