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Investing.com -- Chip stocks slid lower on Monday on reports that the Trump administration is preparing to tighten restrictions on China’s tech sector by expanding existing rules to include subsidiaries of sanctioned firms.
According to a Friday report by Bloomberg News, a proposed regulation would require U.S. government licenses for transactions involving any company that is majority-owned by an entity already subject to U.S. curbs.
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The move targets attempts to bypass current restrictions through the creation of new subsidiaries, a tactic U.S. officials say has become a persistent loophole.
U.S. chip stocks fell in premarket trading, with Nvidia (NASDAQ:NVDA) slipping 1%, Marvell (NASDAQ:MRVL) Technology losing 1.9%, and TSM dropping 0.9% by 10:22 GMT. Broadcom Inc (NASDAQ:AVGO) shares are down 0.9% as well.
The iShares Semiconductor ETF (NASDAQ:SOXX), which tracks the U.S. semiconductor sector, was down nearly 1% in the premarket trade.
Meanwhile, shares in Chinese semiconductor company SMIC slid 1.1% in Hong Kong, while Hua Hong Semiconductor retreated nearly 3%.
Several of China’s key semiconductor companies, including Huawei and Yangtze Memory Technologies, are already blacklisted under Washington’s Entity List as part of broader efforts to slow Beijing’s technological rise.
The new rule is designed to close gaps in enforcement and address what some U.S. policymakers have described as a recurring game of “whack-a-mole,” the Bloomberg report said.
The initiative comes amid renewed strain in U.S.-China relations. President Donald Trump on Friday accused Beijing of undermining recent negotiations in Geneva, while Chinese officials have voiced anger over existing chip export controls. In turn, Washington has condemned China’s export restrictions on critical minerals.
The new subsidiary rule would apply to companies that are 50% or more owned by entities on the Entity List, Military End-User list, or the Specially Designated Nationals list, the report said.
It could be unveiled as early as June, though the timeline and scope remain under discussion, it added. Once finalized, the U.S. is expected to introduce additional sanctions targeting prominent Chinese firms.
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Chip stocks slide on Trump plan to expand China tech restrictions