The New Semiconductor Truce: How US-China Trade Shifts Are Reshaping AI Chip Markets and Corporate Valuations

The recent U.S.-China framework agreement, signed in June 2025, marks a pivotal shift in the global semiconductor war. After months of escalating export controls, the two nations have begun rolling back restrictions on critical technologies like electronic design automation (EDA) software and rare earth minerals. This reversal—from rigid security concerns to pragmatic economic collaboration—creates a new investment landscape for firms at the heart of the AI chip revolution. For investors, the question is clear: How do these shifts impact the valuations of companies like NVIDIA and AMD, and where are the opportunities?

The Policy Pivot: From Conflict to Pragmatism

The June agreement lifted U.S. restrictions on EDA software exports to China, ending a months-long disruption to Chinese chip design projects. Companies like Synopsys and Cadence, which dominate the global EDA market, immediately resumed sales and support, while the U.S. also eased curbs on jet engines and ethane exports. China, in turn, accelerated rare earth shipments to U.S. firms, though military-use minerals like samarium remain tightly controlled.

This détente reflects a strategic recalibration: both nations now prioritize economic stability over maximalist security demands. For the U.S., the move aligns with the newly enacted "Big Beautiful Bill," which boosts semiconductor tax credits to 35%, incentivizing domestic production. For China, it buys time to address its chip industry's vulnerabilities, particularly its reliance on U.S. EDA tools and advanced lithography equipment.

The Investment Case: NVIDIA and AMD Lead the AI Chip Renaissance

The policy shift directly benefits U.S. AI chipmakers. NVIDIA, the market leader in GPU-driven AI training, stands to gain from China's renewed demand for its A100 and H100 chips. While the U.S. retains controls on its most advanced chips, the broader easing of EDA restrictions reduces friction in China's AI model development. This could accelerate adoption of NVIDIA's software stack, which is already used by Alibaba and DeepSeek, among others.

AMD, too, is positioned to capitalize. Its Instinct AI chips, though less dominant than NVIDIA's, are now more accessible to Chinese data centers. Analysts estimate that China's AI infrastructure spending could reach $45 billion by 2027, with 30% allocated to hardware. Both companies also benefit from reduced inventory write-down risks: earlier curbs forced write-offs of unsold chips, but now these stocks can be redeployed profitably.

The Geopolitical Bargaining Chip: Leverage in the New Semiconductor Cold War

The framework agreement is far from a permanent peace treaty. It addresses only recent countermeasures, leaving broader issues like Huawei's chip access unresolved. This creates a cyclical pattern of tension and truce, with each side using trade as a bargaining chip.

For investors, this volatility is an opportunity. The U.S. retains asymmetric leverage over China's semiconductor ambitions: its control of EDA software, advanced lithography tools, and AI chip exports gives it a veto over China's tech progress. This “leverage premium” supports the valuations of U.S. chipmakers, as their technologies remain indispensable to global AI development.

Meanwhile, China's push for self-reliance—through mergers like Empyrean and Primarius in EDA, or subsidies for domestic chipmakers—creates a secondary investment angle. Semiconductor ETFs like SMH or SOXX, which track broader industry trends, could capture the upside of this dual-track strategy.

Risks and Considerations

The path ahead is not without pitfalls. Smuggling of U.S. chips via Taiwan remains a risk, potentially undercutting the benefits of policy easing. Additionally, U.S. lawmakers may reintroduce restrictions if China's rare earth exports to Russia or Iran escalate. Investors should monitor geopolitical headlines closely.

Final Take: Position for the AI Chip Cycle

The U.S.-China semiconductor truce signals a new phase in the tech war—one where economic self-interest outweighs ideological rigidity. For investors, this means:
1. Long positions in NVIDIA and AMD: Their dominance in AI chips and exposure to China's growth justify premium multiples.
2. Monitor inventory recoveries: Companies with write-downs in 2024–2025 (e.g., ASML or Micron) could see earnings boosts as trade barriers lift.
3. Stay cautious on pure-play rare earth miners: While the truce eases immediate shortages, China's control over refining and its strategic use of export controls mean volatility persists.

The semiconductor sector is no longer just about chips—it's about the geopolitical chess match that determines who wins the AI century. For now, the pendulum has swung toward cooperation. Investors who bet on this shift may find themselves on the winning side.