How China's chip ban is a 'tit for tat' political tactic
China has announced guidelines that could block American chipmakers Intel (INTC) and AMD (AMD) from operating in government servers within the country. The move comes as TikTok faces a potential ban in the United States. Founder and Chief Investment Officer at Bokeh Capital Partners Kimberly Forrest joins Yahoo Finance Live to discuss why she believes this announcement is a "tit for tat" scenario.
Forrest notes that China's new policy "reflects last week's TikTok announcement," which she believes is the Chinese government's way of "matching" American efforts to regulate some of its most popular products. However, she states that the possibility of either of these announcements being fully implemented is "very unlikely," describing the situation as "political positioning."
Forrest advises investors to separate the political factors when determining whether to invest in these companies. She emphasizes that what politicians want to happen may not always align with what is actually feasible.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Angel Smith
Video Transcript
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SEANA SMITH: China blocking the use of Intel and AMD chips in government computers and servers eventually. This is a report from the "Financial Times" on the move aimed at phasing out US made microprocessors in favor of domestic options. So "phasing out" there being the key phrase.
Now to break this down and more, the investment implications, we want to bring in Kimberly Forrest, Bokeh Capital Partners founder and chief investment officer. Kimberly, it's great to see you again. So we're starting here with Intel and AMD because two of those names, among your top picks, are where you are seeing the most opportunity from a portfolio strategy standpoint. When you see reports like this, the escalation in geopolitical tensions, how big of a factor do you see that potentially being on the performance of Intel and AMD here in the short term?
KIMBERLY FORREST: So I think that today's announcement really reflects last week's TikTok announcement from the US. And this is tit for tat. So not tick for tock. Or maybe it is. I don't know.
But it really is the Chinese matching the US in forbidding some of its biggest, most used products. And I think it's extremely unlikely that this is actually going to be carried out, if for no other reason, just the volume that AMD and Intel sell into China anyhow. Again, this is only the government PCs, not private PCs.
But I will say, it does have a chilling effect. When Premier Xi looks down on a product and says, we don't want you to buy it, a lot of people in China listen. But, again, I think this is all political positioning at this point.
- But regardless, this is not the first time that we've heard similar warnings from China. And like you mentioned, regarding the TikTok news from last week, a Chinese official saying that China would be biting back, to your exact point there. So I'm curious, is this kind of just the beginning of more regulation that we could see? And to what extent do you think that is already priced in to some of these chip plays?
KIMBERLY FORREST: Sure. Well, I think investors really have to be practical and kind of separate the political and what politicians would like to have happen from the practical. Again, I don't think that China has the manufacturing capacity for these specific chips that they're talking about, especially in servers, the higher-end chips. Can they find some replacements? Sure. But is this going to be a mass overhaul of how they buy things?
On a practical matter, I cannot see that happening. And, again, I don't think-- does TikTok get shut off in the US? Anybody think that? I think it's highly unlikely. So I think these are really just politicians kind of talking to each other. And I don't think that it can be-- either one of these products can be legislated out of existence in either country.
