Nvidia Stock Slides Amidst China Chip Curbs Concerns
Nvidia (NVDA) shares plunged 4.10% on Wednesday following a Bloomberg report indicating that the Trump administration is considering further restrictions on Nvidia's chip sales to China. The report outlines that the negotiations are still in their early stages. The anticipated restrictions would potentially encompass Nvidia's H20 chips, a curtailed product designed to comply with existing U.S. export limitations to China.
Nvidia issued a statement acknowledging its readiness to collaborate with the administration on its AI strategy. However, it emphasized that the benchmarks established by the Biden administration are based on performance indicators achieved five years ago, outdated compared to current gaming and workstation products.
The development coincides with a fluctuating week for Nvidia shares, with Monday witnessing their steepest one-day market capitalization loss on record. The stock declined nearly 17% as investors processed the rising prominence of DeepSeek, a cost-effective AI model developed by a Chinese startup. DeepSeek claims its new AI model utilizes lower-cost chips and reduced data requirements, sparking concerns among investors about potential impacts on future AI chip sales and challenging the dominance of U.S. hyperscalers in the market.
Additionally, investors fretted over the potential disruption of a steady trend in the bull market, in which Nvidia and other Big Tech companies consistently experienced upward revisions to their earnings estimates.
Nvidia shares rebounded 9% on Tuesday, with many on Wall Street dismissing the selloff as excessive. However, Wednesday's swift decline following the Bloomberg report suggests that the stock may not be entirely out of danger. Investors will closely monitor updates from key Nvidia customers such as Tesla (TSLA), Microsoft (MSFT), and Meta (META) after Wednesday's bell for insights into the present demand for AI chips.