Nvidia (NVDA) experienced a significant downturn, falling more than 3% to an intraday low of $129.51 on Monday after the Biden administration introduced stringent new export controls on artificial intelligence (AI) chips aimed at restricting sales to nations like China. This rule caps the number of GPUs (Graphics Processing Units) at 50,000 that can be exported to most countries without a special license, while smaller orders under 1,700 units do not count towards this cap. Notably, 18 US allies, including the UK, the Netherlands, and Taiwan, are exempt from these restrictions.
The White House emphasized that the control over AI technology export is crucial for maintaining both national security and economic competitiveness, stating that the U.S. must ensure its technology underpins global AI development while preventing misuse by adversaries. However, Nvidia’s vice president of government affairs, Ned Finkle, criticized the rule, arguing it was drafted secretly and without adequate legislative review, potentially stifling innovation and competition which are vital for technological advancement.
The response from Nvidia included a subtle appeal to the incoming Trump administration, noting that there’s a 120-day window, as reported by Blooomberg, for companies to comment on the rule before it takes effect in a year, suggesting possible adjustments could be made. This period corresponds with a time when the new administration might influence or alter the policy.
Analysts had mixed reactions to the news. Bank of America’s Vivek Arya maintained a ‘Buy’ rating on Nvidia but acknowledged the new rule adds uncertainty for the company. Citi’s Atif Malik pointed out the risks to Nvidia’s data center GPU sales, which constitute the majority of its revenue. Nvidia’s stock decline was further exacerbated by HSBC’s decision to lower its price target to $185 from $195, citing supply chain issues related to Nvidia’s Blackwell chips, which could impact performance into fiscal year 2026.
The broader semiconductor market experienced ripple effects, with the PHLX Semiconductor Index (SOX) dropping 44 points to 4,994.48 on Monday. While Nvidia’s competitors like Advanced Micro Devices (AMD) and Broadcom (AVGO) posted gains, Qualcomm (QCOM) saw a slight decline, reflecting mixed market reactions to the regulatory changes.
The Semiconductor Industry Association voiced its disapproval of the rushed implementation of these controls, highlighting concerns over the lack of industry consultation, especially given the timing so close to a presidential transition. This situation underscores the tension between national security interests and the global tech industry’s need for open markets and innovation. The outcome of these export controls could significantly shape the landscape of AI technology development, affecting not just Nvidia but the entire sector’s strategy and international relations in technology trade.
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