Nvidia Stock Drops 6% on Rumors of Chip Sale Curbs to China
Nvidia (NVDA) shares plunged 6% on Wednesday after Bloomberg reported that the Trump administration is considering additional restrictions on the company's chip sales to China. The report stated that the discussions are still in the early stages.
The potential restrictions could target Nvidia's H20 chips, a scaled-down version designed to comply with existing US export controls. Nvidia responded in a statement, expressing willingness to cooperate with the administration's AI strategy. However, the company noted that the performance thresholds set by the Biden administration are based on outdated benchmarks.
The news comes amidst a tumultuous week for Nvidia, which witnessed its worst-ever single-day market capitalization loss on Monday. The stock fell nearly 17% amid concerns about the rising popularity of a cheaper and less data-intensive AI model developed by Chinese startup DeepSeek.
Investors are worried that this model could undermine future AI chip sales and challenge the dominance of US hyperscalers in the market. They also fear that it could disrupt the trend of rising earnings estimates for Nvidia and other tech giants.
Nvidia shares rebounded 9% on Tuesday, with many analysts dismissing the sell-off as excessive. However, Wednesday's decline suggests that the stock may not have fully recovered. Investors are expected to closely monitor updates from Nvidia's major customers, including Tesla (TSLA), Microsoft (MSFT), and Meta (META), for insights into the current demand for AI chips.