Nvidia stock slips on China trade fears

Nvidia stock ( NVDA ) fell as much as 2.8% in premarket trading Monday as investors continued to absorb news that Chinese regulators are discouraging local companies from buying Nvidia's artificial intelligence chips.

The stock fell about 1.4% to around $120 after the bell.

Bloomberg reported Friday afternoon that Beijing is urging Chinese companies to buy from chipmakers within its own borders — rather than Nvidia's popular GPUs — amid heightened trade tensions with the United States. Nvidia shares ended down 2.2% at $121 and fell further early Monday. Meanwhile, Chinese AI chipmaker Cambricon Technologies ( 688256.SS ) rose 20% in Monday trading.

Nvidia did not immediately respond to questions from Yahoo Finance.

Meanwhile, the PHLX Semiconductor Index (^SOX) fell 1.2% early Monday. Nvidia rival Advanced Micro Devices ( AMD ) fell 0.6% to around $163. Qualcomm ( QCOM ) shares were flat, while Intel ( INTC ) fell nearly 2% to close at $23. Memory chipmaker and Nvidia partner Micron ( MU ) fell 3.4% to around $104.

The United States enacted stricter export controls on AI chips to China by the end of 2022 — and continues to tighten those rules in an effort to hinder China's ability to advance in the so-called AI arms race. Nvidia felt the impact: Sales in China accounted for 14% of data center revenue in the company's fiscal year ending Jan. 28, 2024, compared with 19% a year earlier.

Nvidia responded by trying to work around those roadblocks by making specific versions of its chips for China, which adhere to stricter regulations.

Its “H20” hopper chips for China launched this year — and are forecast to generate $12 billion in revenue for the company this year. Nvidia is also set to launch a version of its latest Blackwell chip called the “B20” for China. A release date has not been set. Meanwhile, the black market for Nvidia chips has been shut down.

Nvidia stock slips on China trade fears — Ups and downs: Jensen Huang, CEO of Nvidia, keynote speaker at Siggraph 2024. (AP Photo/David Zalubowski)

Nvidia's sales in China rebounded in recent quarters. Sales in China totaled $3.7 billion in the most recent quarter ended July 28, up 33.8% from a year earlier, according to Bloomberg estimates. Nvidia shares are up 144% since the start of the year.

Analysts are bullish on Nvidia despite historic volatility in the semiconductor sector. Wall Street analysts recommend about 90% of the stock be a buy and see the shares rise to $147.61 over the next year, according to Bloomberg consensus estimates.

Daniel Newman, CEO of Futurum Group, told Yahoo Finance that there is “strong optimism right now from top leaders” in the semiconductor sector. He noted that Nvidia stock has been more volatile since its 10-for-1 stock split in June.