Impact of US artificial intelligence chip export restrictions on the performance of Chinese and Indian technology stocks

Wong, Jing Ni (2025) Impact of US artificial intelligence chip export restrictions on the performance of Chinese and Indian technology stocks. Final Year Project, UTAR.

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Abstract

The escalating U.S. artificial intelligence (AI) chip export restrictions represent a pivotal shift in global technology policy, creating significant uncertainty for technology sectors worldwide. While these measures have disrupted global semiconductor supply chains and financial markets, their comparative firm-level impacts on key affected countries like China and India remain insufficiently examined. Existing literature revealed inconsistent findings and a predominant focus on China, leaving the Indian technology sector significantly underexplored. Guided by the Efficient Market Hypothesis (EMH) and Global Value Chain (GVC), this study empirically investigates the financial market impact of these restrictions by analysing the stock performance of leading semiconductor companies in the U.S., China, and India. Employing an event study methodology centred on the policy announcement of 13 January 2025, the research examines a sample of 72 publicly listed firms which are 30 each from the U.S. and China, and 12 from India. The analysis spans pre-announcement, event-day, and post-announcement periods to assess changes in cumulative abnormal returns (CARs), stock price volatility, and trading volume. The statistical analysis employs CARs, volatility measures, and trading volume analysis, supported by one-sample t-tests, paired-samples tests, the Wilcoxon signed-rank test, one-way ANOVA, the Kruskal-Wallis test, and multiple linear regression. The findings reveal significant cross-country differentials. Chinese firms experienced immediate negative market reactions on the announcement day, followed by a strong positive correction, suggesting initial overreaction and subsequent reassessment. Indian technology stocks showed muted and statistically insignificant responses across all event windows. Conversely, U.S. firms exhibited consistently positive and significant CARs. Furthermore, the regression analysis confirms that the severity of the tiered restrictions systematically amplified these market responses, with Tier 3 (China) facing the most pronounced effects on trading volume. These results provide robust evidence of differentiated financial market reactions to geopolitical trade policies, offering critical insights for investors in portfolio risk management and for policymakers in crafting strategic responses to enhance sector resilience.

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