Nvidia Stock Slumps on News of Potential Chip Sale Restrictions to China
Nvidia (NVDA) stock plummeted 4% on Wednesday after Bloomberg reported that the Trump administration is considering further curbs on the company's chip sales to China. Bloomberg emphasized that the discussions are still in the preliminary stages.
The potential restrictions would reportedly target Nvidia's H20 chips, a reduced-performance product designed to comply with existing US export controls.
Nvidia responded in a statement, expressing its willingness to cooperate with the government's AI policy. However, the company noted that the Biden administration's performance thresholds are based on levels achieved five years ago by gaming and workstation products.
The news follows a tumultuous week for Nvidia shares, which last Monday suffered their worst single-day market cap loss in history. The stock declined almost 17% as investors processed the implications of DeepSeek, a cost-effective AI model from a Chinese startup.
DeepSeek claims its model utilizes lower-cost chips and less data, raising concerns about the potential impact on AI chip sales and the dominance of US hyperscalers. These developments also cast doubt on the consistent trend of upward revisions to earnings estimates for Nvidia and other Big Tech companies.
Nvidia shares rebounded 9% on Tuesday, with many Wall Street analysts dismissing the sell-off as excessive. However, Wednesday's sharp drop following the Bloomberg report suggests that the stock may not have yet recovered.
Investors are eagerly awaiting updates from Nvidia's major customers Tesla (TSLA), Microsoft (MSFT), and Meta (META) after the bell on Wednesday for insights into current AI chip demand.