These export restrictions are really shaking up Nvidia’s future prospects.
In recent days, Nvidia has seen a significant decline in stock prices. On Thursday, the company's shares dropped nearly 3%, following a 7% drop the day before. This decline is linked to new export restrictions imposed by the U.S. government on Nvidia’s chips, impacting the company’s financial performance and market value.
The U.S. government imposed a special export license for the sale of Nvidia’s H20 chips to China, designed for the Chinese market. These chips, primarily used for artificial intelligence and high-tech applications, were deemed a national security risk due to the potential military applications in China.
Nvidia announced it would incur a $5.5 billion loss in the first quarter due to the ban on exporting H20 chips to China. The company’s market capitalization dropped to $2.47 trillion as a result.
Loss of $5.5 billion in Q1
Market capitalization decreased to $2.47 trillion
Significant drop in Nvidia’s stock value
Analysts have projected a decline in Nvidia’s revenue due to the restrictions. Some, like Harlan Sur from JPMorgan, predict a loss of $15-16 billion in revenue. Others, including Blaine Curtis from Jefferies, expect a smaller loss of $10 billion.
Analysts' forecasts:
Harlan Sur (JPMorgan): $15-16 billion revenue loss
Blaine Curtis (Jefferies): $10 billion revenue loss
Reduction in annual data center revenue by 8-10%
Other chipmakers have also been impacted by the new U.S. restrictions. Shares of Advanced Micro Devices (AMD) dropped by 1%, while Broadcom and Intel saw declines of 2.1% and 1.6%, respectively.
Market reactions:
AMD: -1%
Broadcom: -2.1%
Intel: -1.6%
The U.S. export restrictions are part of a broader trend of tightening trade policies. The U.S. has been introducing restrictions on technologies like semiconductors and AI, fearing they could be used for military purposes in China.
Key concerns:
Semiconductors
Artificial intelligence
Military applications of critical technologies
The U.S. Department of Commerce recently launched an investigation under Section 232 of the Trade Expansion Act, which could lead to new tariffs on semiconductor imports deemed a national security threat.
The decline in Nvidia’s stock underscores the growing impact of trade restrictions on the high-tech industry. These restrictions have affected not only Nvidia but also other major chip manufacturers. As trade rules continue to evolve, the global semiconductor market will likely experience further disruptions.
