Nvidia (NVDA) shares fell as much as 2.8% in premarket trading on Monday as investors continued to absorb news that Chinese regulators are reportedly discouraging local companies from purchasing intelligence chips artificial from Nvidia.
The stock trimmed losses after the bell, falling about 1.4% to around $120.
Bloomberg reported Friday afternoon that Beijing is urging Chinese companies to buy from chipmakers within their own borders, rather than Nvidia’s popular GPUs, amid rising trade tensions with the United States. Nvidia shares ended the day down 2.2% at $121 and fell further early on Monday. Meanwhile, Chinese AI chip maker Cambricon Technologies (688256.SS) rose 20% in Monday trading.
Nvidia did not immediately respond to questions from Yahoo Finance.
Meanwhile, the PHLX Semiconductor Index (^SOX) fell 1.2% early Monday. Nvidia’s rival, Advanced Micro Devices (AMD), fell modestly, 0.6%, to about $163. Qualcomm (QCOM) shares were flat, while Intel (INTC) fell almost 2% to around $23. Memory chip maker and Nvidia partner Micron (MU) fell 3.4% to about $104.
The United States enacted stricter export controls on AI chips to China in late 2022, and has continued to tighten those rules in an attempt to hamper China’s ability to advance the so-called AI arms race. Nvidia has felt the impact: Sales to China accounted for 14% of data center revenue during the company’s fiscal year ending Jan. 28, 2024, up from 19% a year earlier.
Nvidia has responded by trying to get around those obstacles by creating China-specific versions of its chips, which comply with stricter controls.
Its Hopper “H20” chips for China were launched this year and are expected to generate $12 billion in revenue for the company this year. Nvidia will also release a version of its latest Blackwell chip, called “B20,” for China. No release date has been set. Meanwhile, the black market for Nvidia chips has taken off.
Nvidia’s sales in China have recovered in recent quarters. Sales revenue in China totaled about $3.7 billion in the most recent quarter ending July 28, up 33.8% from a year earlier, according to Bloomberg estimates. Nvidia shares are up 144% since the beginning of the year.
Analysts remain bullish on Nvidia despite historical volatility in the semiconductor sector. About 90% of Wall Street analysts recommend buying the stock and predict the stock will rise to $147.61 over the next year, according to Bloomberg consensus estimates.
Daniel Newman, CEO of Futurum Group, told Yahoo Finance that there is “strong optimism from key leaders” in the semiconductor sector right now. He noted that Nvidia shares have been more volatile since its 10-for-1 stock split in June.
This story has been updated.
Laura Bratton is a Yahoo Finance reporter.
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