Nvidia Shares Plummet Amidst Uncertainty Over $5 Billion Chip Orders from Chinese Tech Giants

 

Nvidia witnessed a notable decline of approximately 5 percent in its shares, reaching a nearly five-month low this Tuesday. The catalyst for this sharp downturn was a report by the Wall Street Journal, suggesting that the company may be compelled to cancel advanced chip orders valued at up to $5 billion from major Chinese technology giants.

Nvidia's stock price fell to $392.30, marking a 4.7 percent decrease and touching its lowest point since mid-June. Notably, Nvidia's stock had been a driving force behind the Nasdaq index's 22 percent gain earlier this year. However, it has since receded by almost 20 percent from its peak closing price of $493.55 on August 31. Consequently, market experts and investors are closely monitoring the situation as the ripple effects of these export restrictions reverberate throughout the global technology industry.

Last week, Nvidia received a notification stating that AI chip orders, intended for delivery to prominent Chinese companies such as Alibaba Group Holding, ByteDance, and Baidu in the coming year, are now subject to the latest export restrictions imposed by the US Commerce Department.

These restrictions have immediate and tangible consequences for Nvidia's business operations. The company had completed its deliveries of advanced AI chips to China for this year and was in the process of expediting some 2024 orders before the new regulations were set to take effect in mid-November.

However, the US government informed Nvidia that the export limitations on high-end chips, including sales to China, were effective immediately. Consequently, Nvidia now faces the challenging task of potentially canceling billions of dollars worth of orders for its advanced chips to China.

This development carries wide-reaching implications, impacting not only Nvidia but also critical AI resources for Chinese tech companies. Orders from leading Chinese firms for the upcoming year exceeded $5 billion, making this setback a substantial blow to the tech giant's revenue projections.

These new export controls on AI chips are part of a broader effort by the Biden administration to limit China's access to advanced technologies, with the aim of curtailing China's progress in military and cyberwarfare capabilities.

This move underscores the ongoing tensions between the United States and China, further intensifying the competition between multinational chipmakers. The situation remains fluid as stakeholders anxiously await further developments in this high-stakes tech industry battle.

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