US-listed Chinese stocks, including Alibaba Group Holding (BABA  ), Baidu, Inc (BIDU  ), JD.com, Inc (JD  ), PDD Holdings Inc (PDD  ), NIO Inc (NIO  ), Li Auto Inc (LI  ), and XPeng Inc (XPEV  ), are trading lower Friday as geopolitical tensions escalate between Washington and China over a potential artificial intelligence technology embargo on the Asian country.

Reportedly, Nvidia Corp (NVDA  ) and other chipmakers face a potential US embargo limiting AI chip exports to China. The new semiconductor sanctions could prohibit Nvidia's AI chip shipments to nations like China.

Washington blacklisted Chinese companies, including gaming giant Tencent Holdings and EV battery maker Contemporary Amperex, citing national security threats.

The Street remains jittery over China's economic recovery. The domestic stimulus measures failed to uplift sentiments and semiconductor sanction speculations pose a double whammy.

Edith Qian of CGS International flagged a volatile first half for Chinese stocks to the South China Morning Post (SCMP), citing the escalation of US-China bilateral tensions as the government of President-elect Donald Trump prepares to assume office on January 20.

Hong Kong's stock market lost $118 billion in capitalization this week, the SCMP reports. China's central bank agreed to avoid buying more government bonds to contain the yuan depreciation.

A strong US labor market has also prompted traders to resist the Federal Reserve's rate cuts, curbing investors' appetite for stocks.

Investors can gain exposure to stocks of companies that are domiciled in China through iShares China Large-Cap ETF (FXI  ) and KraneShares Trust KraneShares CSI China Internet ETF (KWEB  ).