AI Chip Selloff Alert: Crackdown on Nvidia
Markets opened this week on a rebound. Investors believed that the government tariff pause against semiconductors would end the bad news. Instead, the U.S. government informed Nvidia (NVDA) that it would need a special license to ship its H20 graphics processing chip to China. This chip powers artificial intelligence servers.
Nvidia closed down by over 6% last night.
In response, Nvidia filed a significant $5.5 billion charge to its quarterly financial results. The firm said that Q1 results would include costs related to H20 product inventory, purchase commitments, and related reserves. Previously, the firm designed the H20 chip to comply with export restrictions.
The U.S. crackdown on chips and related hardware exported to China is a headwind. AI suppliers cannot grow their revenue in Western markets alone. They need customers like Alibaba (BABA), ByteDance, and Tencent (TCEHY). Those firms ordered around $16 billion in Nvidia H20 server chips in the first quarter. They bought them in anticipation of the chip ban.
Investors should expect the next leg down on chip computers to resume this morning. Watch out for Intel (INTC), Qualcomm (QCOM), Broadcom (AVGO), Micron Technology (MU), and Texas Instruments (TXN).
Communication services firms like Alphabet (GOOG) and Meta Platforms (META) may fall, too. Stock markets will assign a lower valuation to those firms. Traders will expect growth rates for firms like Nvidia to slow in the months ahead.
