UBS's Strategic Outlook: Navigating AI Chip Export Controls and Identifying Winners in the Tech Sector

The U.S. semiconductor export controls targeting China, now expanded to Southeast Asia, are reshaping global tech dynamics. These regulations, designed to stifle China's access to advanced AI chips and manufacturing tools, have created a bifurcated market—favoring U.S. tech giants and compliant Southeast Asian firms while penalizing those tied to Chinese demand. This article dissects the regulatory risks and opportunities for key players, with actionable insights for investors.

The Regulatory Landscape: A Bifurcated Market Takes Shape

The U.S. has tightened export controls on advanced AI chips (e.g., NVIDIA's H100, AMD's MI300X) and semiconductor manufacturing equipment, extending restrictions to Malaysia and Thailand as Tier 2 countries. These measures aim to block indirect procurement channels, such as Chinese firms using regional data centers or shell companies to access restricted technologies. Key rules include:
- License requirements for exports to Tier 2 countries.
- End-use monitoring: Malaysia's new task force tracks shipments to ensure chips stay in designated facilities.
- Compliance deadlines: A May 15, 2025, mandate for documentation and an August 2025 expiration of the U.S.-China trade truce, which could trigger stricter penalties.

Impact on Semiconductor Firms: NVIDIA and AMD Lead the Pack

The export controls have created a clear advantage for U.S. semiconductor leaders like NVIDIA and AMD. Their advanced chips are now reserved for compliant markets, reducing competition from Chinese rivals.

NVIDIA's shares have surged 40% since 2022 as its H100 GPUs became the gold standard for AI training. Meanwhile, China's inability to secure these chips has forced domestic firms like DeepSeek to rely on outdated hardware. AMD, too, benefits from its MI300X chips, which dominate cloud-based AI workloads.

Opportunity: Investors should overweight NVIDIA (NVDA) and AMD (AMD), as their dominance in AI chips and compliance-driven demand is set to grow.

Southeast Asian Data Centers: Winners and Losers

The regulations split Southeast Asian firms into two groups: those with Validated End User (VEU) status and those without.

Winners:
- Unisem (7107.KL): Malaysia's largest semiconductor tester, compliant with U.S. rules, gains from chip destination monitoring.
- CWT Limited (CWT.SI): Singapore's logistics giant, which handles vetted supply chains, benefits from compliance-driven demand.

Losers:
- Alibaba's Malaysian operations: Risk losing access to advanced chips post-August 2025 without VEU validation.
- Non-compliant data center REITs: Firms like Time dotCom face supply chain disruptions.

Malaysia's semiconductor revenue grew 12% in 2024, driven by compliance-aligned firms. However, non-compliant players now face a 30% valuation discount.

Caution: Avoid speculative Southeast Asian projects tied to Chinese demand, such as unvetted data centers or semiconductor testers without VEU status.

U.S. Hyperscalers and Data Centers: A Strategic Advantage

U.S. tech giants—Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOGL)—benefit from owning compliant data centers and AI models. Their ability to train large-scale AI systems using restricted chips gives them a competitive edge.

Equinix and Digital Realty, which operate U.S.-compliant data centers, have outperformed non-compliant peers by 20% since 2022. Their infrastructure positions them to capitalize on the shift toward vetted supply chains.

Recommendation: Invest in U.S. data center operators and hyperscalers with robust compliance frameworks.

Investment Outlook: Navigating the August 2025 Crossroads

The expiration of the U.S.-China trade truce in August 2025 is a critical inflection point. Stricter penalties could further bifurcate the market, rewarding firms that align with U.S. regulations.

• Short-term focus: Buy NVIDIA, AMD, and VEU-compliant logistics firms (CWT Limited).
• Avoid: Non-compliant Southeast Asian data centers and shell companies.
• Long-term theme: The geopolitical reshaping of the semiconductor industry favors U.S. tech leadership, but investors must stay vigilant to regulatory shifts.

Conclusion: Compliance is the New Alpha

The U.S. export controls have turned compliance into a competitive advantage. Investors should prioritize firms with strong ties to vetted supply chains and avoid those exposed to Chinese indirect procurement risks. As the regulatory landscape hardens, the winners will be those who align with—and leverage—the new bifurcated market reality.

Stay ahead of the curve.