TLDR
- Nvidia (NVDA) stock initially rose 0.9% following positive TSMC earnings, but later plunged 6.87% due to new export restrictions
- New U.S. licensing requirements block Nvidia’s H20 chips from entering China without government approval, expected to cost $5.5 billion in revenue
- AMD also warned of an $800 million revenue hit from similar export issues
- The broader tech market tumbled with Nasdaq down 3% and related chip stocks like ASML (-7.06%) and TSMC (-3.60%) falling
- Despite short-term challenges, Wall Street maintains a Strong Buy consensus with an average price target of $170.92, suggesting 63.6% upside potential
Nvidia stock took a rollercoaster ride Thursday as initial optimism from Taiwan Semiconductor Manufacturing Co.’s earnings report quickly gave way to concerns about new U.S. export restrictions targeting China.
The AI chip powerhouse initially climbed 0.9% to $105.39 in pre-market trading. This brief uptick followed TSMC’s better-than-expected first-quarter profit announcement.
TSMC’s CFO Wendell Huang provided some reassurance to the market, noting that demand for the company’s products outside of China “is still really strong.”
But the good news didn’t last long. Nvidia shares plummeted 6.87% during regular trading hours as investors processed the impact of new export controls.
The U.S. government has imposed fresh licensing requirements that block Nvidia from shipping its H20 AI chips to China without prior approval. These specific chips were custom-designed for the Chinese market to work around previous trade restrictions.
$5.5 Billion Revenue Hit
The financial impact is substantial. Nvidia revealed it expects to lose $5.5 billion in revenue due to these new export curbs.
In the company’s own words, these restrictions “significantly reduces our visibility into future sales.” This uncertainty rattled investors already concerned about ongoing trade tensions.
The timing couldn’t be worse. Nvidia CEO Jensen Huang reportedly visited Beijing Thursday to discuss new chip designs, according to the Financial Times.
Nvidia isn’t the only chip maker feeling the heat. AMD also warned it expects an $800 million revenue hit tied to similar export restrictions.
The broader tech sector felt the shockwaves. The Nasdaq tumbled over 3% as chip stocks fell across the board.
Trade War Escalation
The licensing process has no clear timeline, leaving Nvidia with inventory it cannot legally ship to Chinese customers.
These restrictions come as part of a larger trade conflict. The U.S. government recently hit China with tariffs as high as 245% on various imports, including advanced semiconductors.
Federal Reserve Chair Jerome Powell added to market concerns. He warned of “stagflation-like dynamics” triggered by tariffs, where economic growth slows while inflation increases.
This combination of factors created a perfect storm for tech stocks. Related companies like ASML fell 7.06% while TSMC dropped 3.60%.
Strategic Pivot Underway
Facing these challenges, Nvidia has begun to adjust its strategy. The company announced plans to invest $500 billion in U.S.-based AI supercomputing facilities across states like Arizona and Texas.
This massive investment aims to reduce dependency on the Chinese market and maintain Nvidia’s AI leadership position.
The stock has lost approximately 20% year-to-date. Technical analysts point to $96 as a potential short-term floor and $130 as resistance.
Despite these headwinds, Wall Street remains largely optimistic about Nvidia’s long-term prospects.
According to TipRanks, NVDA stock maintains a Strong Buy consensus rating based on 37 Buy and only five Hold ratings from analysts.
The average price target stands at $170.92, suggesting a potential 63.6% upside from current levels.
For investors watching key support levels, the stock’s movement between $96 and $130 will likely determine its near-term direction.
The latest developments leave Nvidia in a strategic reset rather than a fundamental crisis. But navigating the complex trade landscape presents real challenges even for the industry leader.
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