The Trump administration may soon abandon the tiered approach to accessing advanced AI chips and replace it with a global licensing regime with government-to-government agreements. Developing such a structure would likely conform to President Donald Trump’s broader trade strategy of making deals with individual countries. The US would then have an easier time leveraging the American-designed chips in negotiations.
“There are some voices pushing for elimination of the tiers. I think it’s still a work in progress.” — -Wilbur Ross, who served as Commerce secretary during the first Trump administration.
Changes to the Biden-era rule will potentially limit global access to AI chips and the tiers that previously helped determine how many advanced semiconductors a country could obtain.
READ ALSO: 12 AI Stocks Making Waves Today and 10 AI Stocks in the Spotlight This Week.
Provided that the plans to change these rules follow through, these US chips would have the power to steer trade talks. The rule, known as the Framework for Artificial Intelligence Diffusion, was issued by the U.S. Department of Commerce in January. Companies must conform to its restrictions starting on May 15.
Other possible changes being considered in the Trump administration include a lower threshold for an exception to licensing. Currently, orders under the equivalent of about 1,700 of Nvidia’s H100 chips do not count toward country caps. Rather, the government needs to be notified of the order with no licence necessary.
The administration is considering making the cutoff orders under the equivalent of 500 H100 chips. All of these possible changes by the Trump administration aim to make the rules stronger yet simpler. However, a few experts are of the belief that removing the tiers would make the rule even more complicated.
Many companies and the industry as a whole don’t approve of the rule in the first place, stating that limiting access to chips would provoke countries to buy from China instead. Seven Republican senators even sent a letter to Lutnick, the United States Secretary of Commerce, in mid-April to have the rule withdrawn. The letter stated that the restrictions would incentivize buyers, especially in Tier 2 countries, to turn to China’s “unregulated cheap substitutes.”
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds. The hedge fund data is as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A financial analyst looking at the news, analyzing the trends of the insurance market.
10. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 42
Bloom Energy Corporation (NYSE:BE) develops solid-oxide fuel cell systems for on-site power generation, helping meet the growing energy demands of AI data centers. On May 5th, Mizuho upgraded the stock to “Outperform” from Neutral and set a price target of $26, down slightly from $28. The firm sees an attractive risk/reward for the energy company. It also cited growing demand for alternatives to conventional power sources.
“We upgrade to Outperform as we see asymmetric risk/reward upside from marginal orders from utilities or other large load customers.”
It also said that it “sees potential for Bloom’s multiple to expand toward GEV’s on future large customer/data center deal announcements.”
9. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 96
Advanced Micro Devices, Inc. (NASDAQ:AMD) develops and sells semiconductors, processors, and GPUs for data centers, gaming, AI, and embedded applications. On May 5, Bank of America reiterated a Neutral rating on the stock with an associated price target of $105.00. The firm said that it is sticking with its neutral rating on the stock heading into earnings on Tuesday. Despite expectations of a strong quarter backed by robust server CPU sales and gains in desktop PC market share, AMD is set to face major challenges in the upcoming quarters.
In particular, China’s restrictions on AMD’s MI308 products are anticipated to lead to a substantial sales headwind and a decline in gross margins for the second quarter. AMD also faces strong competition from NVIDIA and custom-chip manufacturers, particularly in the AI GPU market where its offerings aren’t as particularly strong. The company’s market share in the PC segment may also plateau amid strong competition.
“Maintain Neutral on AMD’s consistent execution, reasonable valuation and attractive compute market exposure, offset by strong competitive headwinds.”
