Trump Relaxes Nvidia AI-Chip Restrictions. It’s the Fuel Tech Stocks Needed.

President Donald Trump and President Xi could be set for a face-to-face meeting on trade before the end of the year. (AFP via Getty Images)

Nvidia stock powered the semiconductor sector firmly higher in early Tuesday trading, setting up both the S&P 500 and the Nasdaq Composite for fresh all time peaks, following what could be the biggest reversal in policy from President Donald Trump since his pause on reciprocal tariffs in early April.

Nvidia said late Monday it will resume the sale of the company’s H20 chips, a less-powerful version of its artificial-intelligence-powering semiconductors designed to meet U.S. restrictions on high-tech exports, to customers in China. The Trump administration blocked the sale of H20 chips in April, citing national security concerns.

Nvidia CEO Jensen Huang appeared to win concessions for the resumption of H20 sales following a meeting last week with president Trump at the White House. Huang also met with top officials in Beijing this week.

Nvidia shares are set for a record high open, and are likely to add around $200 billion in market value, as investors bet it will allow for billions in lost sales and a leading position in the China market.

The administration’s backtrack on a key plank in its AI strategy, however, could be a signal to the broader market that the U.S. and China are inching closer to a working trade agreement.

The two sides have been at odds over tariffs, trade barriers and security issues, but have recently reached agreements on the rare earth exports amid the thawing of tensions between Washington and Beijing last month.

Secretary of State Marco Rubio also said last week that the “odds are high” for a meeting President Trump and China President Xi Jinping later in the year.

Huang’s ability to broker an agreement with the White House, meanwhile, may provide firmer evidence to the broader market thesis that President Trump’s tariff threats are negotiating tactics rather than finalized arrangements.

That could leave room for tariff softening between the U.S. and its larger trading partners, including the European Union, which was threatened with a 30% levy, 10 percentage points higher than on Liberation Day, only last week.

Tariff and trade risks remain the market’s key focus, according to data from Bank of America’s Fund Manager Survey, which was published earlier Tuesday.

The ability of Nvidia, the world’s largest public company, and the undisputed leader in AI semiconductor technology, may not portend massive changes on trade policy from the White House, but it does suggest the looming August deadlines could be malleable.

That could provide a key boost to markets heading into the start of the second-quarter season, as stocks have largely stalled their searing spring rally over the month of July amid trade, growth, and inflation concerns.

The optics of relaxing export restrictions to China are also bullish for the tech market, and AI-focused companies in particular.

President Trump has shown a keen interest in establishing a U.S.-based infrastructure to support AI development. In May, he rescinded high-tech export restrictions put in place by President Joe Biden, and brokered a $100 billion joint venture with Oracle , OpenAI, and Japan’s SoftBank earlier this year.

He is also set to unveil another $70 billion in AI and energy investments at an event in Pennsylvania later today with executives from BlackRock, Palantir Technologies , Exxon Mobil, and Chevron slated for attendance.

That level of commitment, as well as a willingness for flexibility in AI-related policy, will support the market’s most important sector into the back half of the year and beyond.

“The AI Revolution is just hitting its next stage of growth,” Wedbush analyst Dan Ives wrote in a report.

“This is a monster win for Nvidia and a major bullish tailwind for the tech sector that will propel Street estimates to go up meaningfully over the coming years with China back in the fold,” he added. Ives rates Nvidia stock at Outperform with a $175 price target.

Write to Martin Baccardax at martin.baccardax@barrons.com