Nvidia Stock Slips Pre-Market As Team Biden Expands China Chip Export Crackdown: Retail Feels Uneasy

Shares of Nvidia Corp. ($NVDA) were down as much as 1% in pre-market trading on Monday after the U.S. announced tighter restrictions on China’s access to artificial intelligence (AI) and chips. 

This is the third time in the past three years that President Joe Biden’s administration has implemented these controls to discourage China from utilizing advanced technology originating from the U.S.

According to Reuters, the new measures will ban the export of certain chip and machinery types to China and include more than 100 Chinese firms in the restricted trade list.

Adding pressure to the stock, the world’s biggest hedge fund, Bridgewater Associates, disclosed it has sold 1.8 million shares of the leading chipmaker for AI applications.

Furthermore, Amazon ($AMZN) announced a $700 million investment in Tenstorrent, an AI chip startup that’s looking at taking on Nvidia’s market leadership. 

Nvidia Corp.'s Sentiment and Message Volume on Dec. 2 as of 8:05 a.m. ET | Source: Stocktwits

Retail sentiment around the stock continued to be in the ‘bearish’ (43/100) zone with ‘low’ (42/100) message volumes after the Thanksgiving weekend. 

Chinese state media has warned that “there are no winners in tariff wars.” Beijing could implement retaliatory measures that would further strain U.S.-China trade relations, creating ripple effects for American companies like Nvidia.

Revenue from the Chinese market accounted for 17% of NVDIA’s total revenue last fiscal year; this figure has declined from 26% two years prior due to existing U.S. export restrictions.

Furthermore, Nvidia faces competition from domestic Chinese chipmakers, which have been encouraged by the government to source locally amid escalating trade tensions. 

This shift could further diminish Nvidia’s market share in China, especially as local firms like Cambricon and Semiconductor Manufacturing International Corp. saw their stocks rise following government guidance away from foreign suppliers.

Nvdia Corp's stock movement year-to-date. | Source: TradingView

According to Barron’s, the new restrictions should not have a direct impact on Nvidia but could be a boon for the company. 

Since Nvidia is already restricted from selling its most advanced chips to the Asian behemoth, these restrictions could increase demand for Nvidia’s H20 processor, which is specifically designed for the Chinese market.

The semiconductor giant’s stock has gained 183% this year so far. 

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See also: Chip Stocks Rise Amid Reports Of Eased U.S. Sanctions, Despite Bernstein's Downgrades: Retail Sentiment Split