TLDR
- Nvidia stock fell 0.8% in premarket trading after rising 4% the previous day when Trump lifted export restrictions on H20 AI chips to China
- The company now accounts for nearly 8% of the S&P 500, the highest single-stock weighting in 45 years
- Nvidia’s market cap reached $4.2 trillion, making it the most valuable U.S. company by over $1 trillion
- Jefferies raised their price target to $200 while Bank of America increased theirs to $220
- CEO Jensen Huang is visiting China this week to capitalize on the renewed market access
Nvidia stock retreated 0.8% to $169.36 in premarket trading Wednesday. The pullback came after shares jumped 4% Tuesday following news about China chip exports.
President Trump lifted export restrictions on Nvidia’s H20 artificial intelligence chips earlier this week. The move allows the company to resume sales in one of its biggest markets.
Treasury Secretary Howard Lutnick explained the decision during a CNBC interview. He said the change came after China and the U.S. reached a deal on magnets.
Lutnick downplayed the capabilities of the H20 chips. “We don’t sell them our best stuff, not our second best stuff, not even our third best,” he said. “Fourth best is where we have come out that we’re cool.”
The H20 model was specifically developed after former President Biden prevented export of the most advanced semiconductors to China. Despite being less powerful, the lighter restrictions give Nvidia more room to grow in the Chinese market.
CEO Jensen Huang is visiting China this week to capitalize on the opportunity. On Wednesday, he praised China’s lower-cost AI models for helping advance the technology.
Earlier this year, Huang said chip-export restrictions would cost the company about $8 billion in sales for the current financial quarter. The policy change could help recover some of those lost revenues.
Market Dominance Reaches New Heights
Nvidia shares climbed to a record high Tuesday, closing with a $4.2 trillion market value. The achievement helped push the technology-heavy Nasdaq index to also close at a record.
This puts Nvidia more than $1 trillion ahead of Apple at $3.1 trillion. Microsoft sits in second place at $3.8 trillion, while Amazon comes fourth at $2.4 trillion.
The company now accounts for nearly 8% of the S&P 500. This represents the highest weighting for a single stock in 45 years, according to Todd Sohn from Strategas Securities.
For perspective, entire sectors like industrials account for just 8.7% of the index. Healthcare stands at 9.1%.
Analyst Upgrades and Market Impact
Jefferies analysts led by Blayne Curtis raised their price target on Nvidia stock to $200 from $195. The team named Nvidia as their top pick.
Bank of America also increased their price target to $220 from $180. The upgrade came on news of the China chip export policy change.
The Magnificent 7 tech stocks as a group now comprise about one-third of the S&P 500. Since 2020, Big Tech has driven 46% of the S&P 500’s daily price swings.
This is higher than the 33% seen between 2014 and 2019. DataTrek Research highlighted this trend in a note to clients Tuesday.
Nvidia’s continued outperformance gives it outsized influence over the entire market. The company’s weight affects passive investors through broad market index funds.
As a result, allocations to defensive stocks have fallen to the lowest levels in decades. The concentration risk continues to grow as Nvidia’s market cap expands.
Stock in Dutch chip company ASML fell sharply Wednesday after cutting its outlook. The company blamed trade wars and tariffs for lower demand.
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