NVIDIA stock plummeted on Tuesday following a report stating that the latest U.S. trade restrictions targeting China could force the AI chip giant to cancel orders worth billions of dollars.
According to the Wall Street Journal, the U.S. government’s export controls may have a profound impact on $5 billion worth of orders from major Chinese corporations in 2024. NVIDIA Corporation (NASDAQ: NVDA) had initially aimed to supply advanced chips to China before the new regulations were set to take effect in mid-November. However, in a surprising twist, U.S. officials informed Nvidia last week that the new export restrictions would be enforced immediately.
The restrictions on AI chip sales to China are integral to the Biden administration’s ongoing efforts to shield artificial intelligence technology from falling into the hands of China’s military. Fears of China harnessing AI chips for cyberwarfare and various other applications have escalated the urgency of these measures.
The latest restrictions, announced on October 17, mandate that any company producing AI chips exceeding a specified performance benchmark must obtain a license from the U.S. Commerce Department before exporting them to China and other countries deemed of concern.
NVIDIA stock suffered a significant blow following the news, falling by 1.45% to reach a value of $405.66. NVIDIA shares had previously reached an all-time high of $502.66 on August 24, following the release of its fiscal second-quarter earnings report.
Looking ahead, NVIDIA Corporation (NASDAQ: NVDA) is scheduled to report its fiscal third-quarter results on November 21.