On Monday, many Semiconductor Stocks experienced an increase, among which $Advanced Micro Devices (AMD.US)$ the rise was prominent, as reports suggested that the Trump administration might reduce the scope of some planned tariffs.

Chip stocks performed better than Large Cap,$PHLX Semiconductor Index (.SOX.US)$increasing by 3%, with only Intel (INTC.O) among its constituent stocks.$Broadcom (AVGO.US)$Two Stocks fell. Advanced Micro Devices has struggled recently but became one of the leading stocks in the chip sector on Monday, with a price increase of 7%, marking the largest single-day rise since February 29, 2024 (when it had a rise of 9.1%).

So, does the rebound of chip stocks on Monday mean investors can re-enter the market, especially if the tariffs pushed by the Trump administration ultimately are not as broad as previously expected? The answer is not straightforward, as there is another issue that may affect the sales of certain AI Chips.

Melius Research Analyst Ben Reitzes stated in a report to clients that the biggest issue weighing on many semiconductor stocks is how the Trump administration will handle the AI-related chip export restrictions implemented by the Biden administration in its final weeks.

"The greatest uncertainty faced by the chip Industry is whether Trump might retain Biden's cumbersome 'AI Diffusion Rules,' which added regulatory layers, bureaucratic procedures, and restricted the sales of AI Chips, affecting even America's allies," Reitzes wrote in Monday's report. He added that the Trump administration is likely to maintain strict regulatory approaches.

This issue is particularly thorny for$NVIDIA (NVDA.US)$.

"The real question is whether the Trump administration will come up with better ways to limit China’s access to AI computing capabilities," Reitzes noted. He mentioned that these regulations will take effect on May 13, unless the Trump administration intervenes to adjust them. "However, we would not be surprised if the government maintains a hardline stance to limit China's technological capabilities globally. This uncertainty does not help the semiconductor industry, especially NVIDIA."

Last month,$Microsoft (MSFT.US)$also joined the camp opposing the policy. The company's Vice Chairman and President Brad Smith published a blog post calling on the Trump administration to reconsider the regulations that Microsoft believes are excessively strict. "The rules put forth by the Biden administration go beyond what is necessary, categorizing many important allies and partners of the USA as 'second class' and imposing quantitative restrictions on the ability of USA tech companies to build and expand AI datacenters in these countries," Smith wrote.

However, Reitzes pointed out that Broadcom and$Marvell Technology (MRVL.US)$are not expected to be severely affected by these restrictions.

Broadcom supplies chips to TikTok's parent company ByteDance, and their performance is below the restricted threshold, and their other key AI clients are all USA companies," Reitzes stated.

As for AMD, Reitzes believes that the outlook for its AI acceleration chip product line is improving. AMD recently received support from$Oracle (ORCL.US)$In a significant L procurement Order, Oracle stated in its recent Earnings Reports conference call that the company has signed a "multi-billion dollar contract" to purchase 30,000 units of AMD's MI355X graphics processing units (GPU) for its new Datacenter.

"This procurement by Oracle may mark an expansion of the relationship between the two parties and lay the groundwork for the MI400 series accelerators set to be launched in 2026," Reitzes stated.

Editor/Rocky