Nvidia Stock Declines Amid Tariffs and Export Restrictions

On Monday, Nvidia (NVDA) stock witnessed a significant drop of up to 5% during early trading, continuing the downward trend from the preceding week. Investors responded negatively to the announcement of new tariffs by U.S. President Donald Trump.

Tariff Impact

President Trump's unexpected announcement on Saturday imposed additional tariffs of 10% on Chinese imports and 25% on imports from Mexico and Canada, surprising investors who had not factored in such risk. This news sent the technology-heavy Nasdaq (^IXIC) index down by over 2% on Monday morning.

Export Restrictions

Nvidia's stock was already impacted last week by reports that the Trump administration was considering stricter export restrictions on Nvidia chips to China. According to Bloomberg's anonymous sources, the administration was in early discussions to expand restrictions on the export of Nvidia's H20 chips, a version of its Hopper AI chips designed specifically for China's compliance with U.S. export rules. China accounted for approximately 17% of Nvidia's 2024 sales.

Impact on Chip Demand

While semiconductors are not directly affected by the new tariffs, Bernstein analyst Stacy Rasgon noted in a Monday research note that the duties would impact imports of data processing equipment, including servers utilizing AI chips. Higher prices for these products could potentially reduce demand and indirectly affect chip sales. Rasgon highlighted that in 2023, the U.S. imported $39 billion worth of data processing equipment, such as PCs and servers, from China and $28 billion from Mexico.

Contract Manufacturing

Contract manufacturer Foxconn is constructing the world's largest factory in Mexico for assembling servers with Nvidia's Blackwell AI chips. News of the tariffs over the weekend also led to declines in other chip stocks. Nvidia's rival Advanced Micro Devices (AMD) and Qualcomm (QCOM) both dropped by around 2%, while Micron (MU) and Broadcom (AVGO) declined by nearly 3%.

CEO Meeting

Nvidia CEO Jensen Huang met with President Trump at the White House last Friday. An unnamed source told Reuters that they discussed DeepSeek, a new AI model released by a Chinese firm that has raised questions about Big Tech's significant spending on artificial intelligence infrastructure.