Chinese shares touched a one-year low as optical companies sank on proposed US sanctions and chipmakers retreated on a report authorities may open the local market further to Nvidia Corp.’s semiconductors.
The onshore benchmark CSI 300 Index dropped 2.2% on Monday. Chipmakers Cambricon Technologies Corp. and GigaDevice Semiconductor Inc., as well as optical firms Zhongji Innolight Co. and Eoptolink Technology Inc., were among the top decliners, down at least 6% each. The chip-heavy Star50 gauge fell the most in more than a month.
Mainland Chinese markets were closed on Friday for a public holiday.
Investor mood soured after The Information reported that Beijing signaled it may let local firms buy a certain type of Nvidia chips, a development that may further threaten homegrown chipmakers amid already intense domestic competition. Adding to the weakness was a Friday move by four US senators to introduce legislation that named Innolight and Eoptolink as restricted vendors for government procurement.
“The direct earnings impact is limited, but it shows that tech restrictions are running on a separate track to diplomacy,” said Billy Leung, an investment strategist at Global X Management, referring to the proposed sanctions on the two Chinese optical firms. He added that the two-month US-China trade truce reached at last week’s summit “fell short of hopes.”
The closely watched gathering between US President Donald Trump and his Chinese counterpart Xi Jinping yielded few surprises for markets, including expected tariff relief on about $30 billion of products as well as a decision to extend the trade ceasefire until January.
The Information reported earlier that the Chinese government has signaled it may allow companies such as Alibaba Group Holding Ltd. and ByteDance Ltd to buy Nvidia’s RTX Pro 5500 chips, citing people familiar with the matter. The RTX Pro 5500 is a processor intended mainly for graphics and simulations, though it can also support AI services. Unlike Nvidia’s top-of-the-line accelerators such as the GB300 series, it’s built on older-generation processes and is designed to provide workstation computation at scale.
Regarding the US bill targeting Zhongji Innolight and Eoptolink, “the main concern is not the immediate loss of NSS orders, but the possibility of broader restrictions in the future,” Citigroup Inc. analysts including Kyna Wong wrote in a note, referring to the US National Security Systems procurement program.
Chinese stocks have been languishing amid a lack of momentum. AI hardware stocks, investor favorites earlier in the year, have failed to recover from a July selloff with concerns over lofty valuations and fierce local competition. The broader market is also sluggish as consumption remains in the doldrums with no stimulus in sight.
Most Asia stocks fell on Monday as global macro factors such as high oil prices spurred risk-off sentiment. Chinese investors may also be reluctant to add positions ahead of a weeklong holiday starting Thursday.
“With the National Day holiday week coming up there may not be much investor appetite to enter the market given the macro risks such as oil prices and rate volatility,” said Marvin Chen, a strategist at Bloomberg Intelligence. “Trump-Xi meeting also lacked concrete measures to drive market sentiment.”
Disclaimer: This report is auto generated from the Bloomberg news service. ThePrint holds no responsibility for its content.