Analysis of Potential Impacts from Tighter AI Controls under the Trump Administration
The Trump administration is preparing to implement new restrictions on AI chip exports, particularly targeting shipments to Malaysia and Thailand. This move is aimed at preventing advanced processors from reaching China through third-party countries, following rising concerns regarding semiconductor smuggling and Chinese access to AI compute capacity located in Southeast Asia.
Overview of the Proposed Regulations
According to reports, the draft rule from the Commerce Department will focus on companies like NVIDIA. Notably, Malaysia has increasingly become a significant hub for AI data centers, contributing to nearly 12% of NVIDIA’s global sales in the previous quarter. However, the extent of NVIDIA’s exposure to Thailand remains less clear.
The new controls are said to follow a rollback of the stricter “AI diffusion” export curb system that was established under the prior administration. If enacted, this would represent the first major round of AI regulation by the Trump administration since it repealed the regulations introduced by the Biden era. A similar legislative proposal, known as the AI Diffusion Act, was introduced in January 2025 but was subsequently rescinded.
Implications for Global Investors
While refraining from making specific predictions about individual stocks, several key observations can be drawn regarding the potential impacts on global investors with exposure to AI technologies:
1. Potential for Market Volatility
The introduction of new regulations, coming on the heels of a rally in tech stocks during June, could result in increased volatility. Although the proposed measures appear relatively modest, they may still serve as a near-term overhang for cyclical tech stocks. The recent uptick in global tech valuations has been primarily driven by price-to-earnings multiple expansion rather than positive earnings revisions, suggesting that there is limited room for any disappointments in the upcoming second-quarter results.
Moreover, the market is currently entering its peak blackout period for share buybacks, which restricts companies from repurchasing their shares—a practice often employed to support share prices during downturns.
2. Shielding of U.S. Hyperscalers and Data Center Operators
Reports indicate that the proposal includes a crucial concession allowing American data center operators to continue importing U.S. AI chips. This development implies that major U.S. hyperscalers, such as Google and Microsoft, can proceed with their regional data center expansions without facing significant disruptions. Conversely, Malaysian companies focused on U.S.-backed projects are expected to remain relatively insulated from the new export restrictions. In contrast, data center operators that are building facilities based on speculative demand or targeting Chinese markets may face greater risks of order cancellations or project delays.
3. Ongoing Demand for AI Capital Expenditures
Current analysis reveals that the demand and outlook for AI capital expenditures (capex) remain robust. Notably, investments in AI compute—encompassing GPUs and custom AI chips—have attracted significant capital investment in 2025. This trend is evidenced by solid spending commitments from major players, including the Big 4 and sovereign buyers from regions such as the Middle East, as well as some demand linked to China.
Moreover, the early April ban on H20 AI chip exports to China has already contributed significantly to market adjustments. Projections suggest that AI compute’s share of total AI capex will rise from approximately 53% in 2024 to about 59% in 2025. As investments broaden into areas such as high-bandwidth memory, networking, and industrial AI infrastructure, it is expected that AI compute’s share may later normalize to around 50-55% starting in 2026.
Strategic Recommendations for Investors
In light of the evolving landscape of chip restrictions and the broadening trends in AI, investors are encouraged to adopt a balanced portfolio stance within the tech sector and the AI value chain. Recently, there has been a strategic shift away from some cyclical AI-linked stocks that experienced gains in June, with a tilt toward select AI laggards as well as internet and software stocks.
Given the heightened volatility, it may also be prudent for investors to consider structured strategies to navigate market fluctuations. Beyond the immediate risks posed by these regulatory changes, the long-term trends in AI are expected to continue driving substantial gains within the tech sector. However, data center stocks in Southeast Asia may become more sensitive to headline risks and potential policy shifts in the near term. Within the realm of Chinese equities, it is believed that the impact on large-cap tech shares should remain manageable.
