CNBC's Kristina Partsinevelos joins 'Squawk on the Street' to discuss the latest news from the chips sector.

New York

The United States has lifted a six-week restriction on the export of chip design software to China, resulting in a notable increase in the stock prices of companies such as Cadence Design and Synopsys. This policy reversal is part of a broader negotiation, with China expected to expedite permits for materials like rare earths, which are crucial for electronics manufacturing. 

While the change directly benefits companies specializing in electronic design automation (EDA) software, such as Cadence and Synopsys, it does not affect existing restrictions on advanced AI processors from firms like NVIDIA and AMD. The move is seen as a negotiating tactic in ongoing trade discussions, with industry observers noting that U.S. chipmakers continue to advocate for further easing of export controls.

Chip stocks pop as U.S. eases China chip curbs

Welcome back. The U.S. lifting chip software curbs on China. Our Cristina Partenevelos has the details with Cadence Design, Cristina, popping almost to the top of the S&P. Yeah, yeah, one of the big movers today. And that's because the Trump administration is showing an abrupt reversal of a six-week chip design software export restriction to China. And it really, like you mentioned, sent shares of Cadence and Synopsys both up, Cadence up 5 percent, Synopsys almost 5 percent. In exchange, China will likely smooth the permit process for materials it recently restricted, including rare earth. Mizuho, though, on one hand right now, they just put out a note suggesting Trump's chip software U-turn could really restore at least 10 to 12 percent of total revenues for both of these names, Cadence and Synopsys, that was at risk. The rumors, though, have been milling about for this reversal just over the last week or so, which probably explains why you're not seeing as much of a stock pop for these two names. The move, though, also resolves restrictions on electric design automation tools that control 70 percent of China's chip design market. But it also raises bigger questions. Could tougher export controls on advanced AI processors from NVIDIA and AMD also face similar reversals as trade negotiations progress? Unlike Cadence and Synopsys, AMD and NVIDIA don't produce EDA software. That's what it's called, electronic design automation. So today's announcement doesn't directly impact them. NVIDIA's H20 AI chips designed specifically for the Chinese market to comply with prior export controls still remains restricted, as do other advanced AI processors. And we know Jensen Wang and other tech CEOs have been very vocal about the restrictions, wanting them to be reversed. Still, this swift policy flip reinforces President Trump's pattern of using tech restrictions as negotiating leverage rather than permanent policy tools, especially given how intertwined these supply chains are. I reached out to NVIDIA, seeing maybe by chance if they happen to hear anything. They said no, but we know that they've been working and there's been a lot of travel to D.C. over the last couple of months to try to reverse those export controls specifically against AI accelerators and GPUs, guys. Is this a top area of concern for the Chinese, Christina, that's likely to then lead to significant agreements, significant progress on the rest of the trade deal? Is this something they're going to celebrate or is it kind of a footnote? They've already received a lot of this equipment. So the EDA software, China has been receiving it for quite some time. This ban was only put in place for six weeks. So is it a moment to cheer? Yes, because this software is so important to build more advanced chips from the likes of, let's say, Huawei. So I guess Huawei would be the one cheering. But overall, I don't know if it's necessarily a major win, given they still want access to the more advanced chip technology that would be coming from NVIDIA, as well as AMD. That is really an important part of this equation. But that could, as we're seeing the reversal from President Trump, it could change in the coming weeks or so, given this 90 day pause with all the tariffs and further news that we should be expecting soon on this chip front. Well, I do think it signals that things have thawed a bit and that there's obviously been a negotiation here. China is going to speed up the licenses of the rare earth magnets. And in exchange, U.S. is going to lift these countermeasures. And one of them was export controls on chip software. Yeah. So wouldn't President Trump say this is a major win, right? Because China is moving ahead with the rare earths, which is really not only important for chips, but so many electronics coming from the United States and necessary for that matter. So I'm sure this is considered a win. But on the administration's part, we don't want China to receive the most advanced technology. But you have the chip makers that say they're going to move forward regardless. So the United States may as well be part of that equation. It's still unsure how the Trump administration is going to take up that stance. Are they going to agree with the chip makers and say they should, no matter what, just be part of the equation, drop those restrictions or continue to really put, I guess, a block on China moving ahead? But it seems like they're already doing pretty well. Huawei's advanced chips are quite impressive, more advanced than the H20s from NVIDIA. Christina, thanks so much. Really, really interesting.

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