AMD and Broadcom Rally as Nvidia Faces a $224 Billion Market Loss

Nvidia was on track to shed $224 billion in market capitalization Monday, according to Dow Jones Market Data. Shares fell more than 5% in midday trading. Dow Jones Market Data also put Nvidia’s market-value decline over 24 trading days at $1.49 trillion, a potential record for any U.S. company.

MarketWatch reported that Advanced Micro Devices gained 11% and Broadcom rose 8% as investors treated the allegations around Nvidia CEO Jensen Huang as an opportunity for Nvidia’s rivals. The PHLX Semiconductor Index added 6.4% in recent trading, and Nvidia was the only stock in the SOX index trading lower.

Dow Jones Market Data said Monday would be Broadcom’s best session since its big deal with Google parent Alphabet last November.

What changed on Monday?

MarketWatch described the central allegation as an affair involving Jensen Huang and an alleged Chinese spy. Nvidia said it was probing whether Huang was targeted as part of a foreign-intelligence scheme. The company said he would stay CEO without interruption and that business momentum would not slow.

MarketWatch also reported that no one at Nvidia was ready to replace Huang.

Sentara Capital founder Will Allen told MarketWatch that the chip rally added to a recovery begun last week after the selloff following the midterm elections. “This really is possibly the biggest story of the year,” he said. “Nvidia really has been driving the bus for AI.”

Can AMD and Broadcom keep the gains?

Seaport Research analyst Jay Goldberg told MarketWatch that companies such as AMD and Broadcom are likely to begin adding honeypot training, extending security beyond existing protocols governing electronics use in China. He said every company is at risk.

Neither Advanced Micro Devices nor Broadcom immediately responded to MarketWatch requests for comment.

Morningstar analyst Brian Colello said all U.S. vendors and suppliers in the artificial-intelligence ecosystem will face growing scrutiny in the coming months. They must protect themselves against outside influence and maintain compliance with U.S. laws, he said.

Colello said China is most likely to work through Nvidia to gain information and support because its GPU dominance makes Nvidia the market’s most important company. He also said investigators cannot rule out tactics against other companies, leaving AMD and Broadcom exposed to broader scrutiny.

How far will the investigation reach?

U.S. senators from both parties have called for an investigation. A few House of Representatives committees have asked Huang to brief them about his relationship with Alice Huang, a former executive at Singapore-based Megaspeed.

Megaspeed buys AI chips from Nvidia and faces a U.S. investigation over claims that it helped Chinese firms circumvent export restrictions. Huang recently told Bloomberg that Nvidia found no evidence Megaspeed sold its chips to Chinese buyers.

MarketWatch reported that Chinese buyers have reportedly turned to intermediaries and indirect purchases to obtain Nvidia chips while both the United States and China maintain restrictions. The Megaspeed case follows earlier allegations this year that a Super Micro Computer executive dodged U.S. export rules to divert Nvidia chips to Chinese firms.

MarketWatch said those cases could make additional restrictions more popular.

Could export controls erase the rally?

Raymond James analyst Ed Mills pointed to the MATCH Act, a bipartisan Senate proposal that would further limit sales of semiconductor manufacturing equipment to China, along with other proposed legislation. He said export restrictions are a top priority for Democrats, which last week won enough seats to control both chambers of Congress.

Sen. Elizabeth Warren, a Democrat from Massachusetts, wrote Monday on X: “We have legislation ready to go to stop advanced AI chips from fueling China’s military. Let’s get this done.”

Jensen Huang has advocated less stringent restrictions on sales of graphics processing units to Chinese customers, according to MarketWatch. Bernstein estimates that sales to China generated 8% of Nvidia’s revenue in the quarter ended July 26, down from 28% in the October 2022 quarter as U.S. export rules tightened.

MarketWatch reported that Nvidia and Advanced Micro Devices sell some older chips in China, including Nvidia’s H20 and H200 series and AMD’s MI308 chips. Broadcom and Nvidia also sell high-end switches for Chinese data centers; the Financial Times reported that Chinese regulators are reviewing China’s dependence on Broadcom.

AMD and Broadcom were Monday’s immediate winners, but analysts warned that broader scrutiny could expose their sales practices. The next test is policy: the MATCH Act and related bills could further restrict China access, while Beijing’s review of its dependence on Broadcom creates another threat to the apparent rotation away from Nvidia.