What Happened?
Shares of leading designer of graphics chips Nvidia (NASDAQ: NVDA) fell 7.4% in the morning session after the company announced it might be unable to sell some high-end chips (including the H20 chips) to China due to export controls and requirements from the Trump administration. Notably, Nvidia received an export restriction notice on April 9, 2025, suggesting the development was unanticipated heading into the quarter and likely not baked into its near-term sales forecast.
As a result, the company planned to take a $5.5 billion charge due to inventory writedowns and canceled sales.
The H20 chips were built for China to fit within limits set during the Biden administration. China brought in more than 10% of Nvidia's sales in fiscal 2025, so the new restrictions could still weigh hard on Nvidia's growth in the near term.
On a separate note, chip tool maker ASML posted weak bookings (a key demand indicator) which fell below Wall Street's expectations, noting that tariffs had made the industry's outlook more uncertain. The semiconductor industry's intricate supply chain means that ASML's performance has cascading effects on companies like Nvidia and AMD. Investors treat ASML's outlook as a proxy for demand in the industry, and if ASML's orders are down, it suggests chip producers are delaying capacity expansion.
ASML's CEO, Christophe Fouquet, called out "customer cautiousness" and a "more gradual" recovery in areas outside of AI. Such caution among customers can imply reduced demand by fabless chip designers such as Nvidia and AMD, affecting their short-term revenues and stock valuations.
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What The Market Is Telling Us
Nvidia’s shares are extremely volatile and have had 35 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock gained 5.7% as markets rallied sharply on the news that President Trump announced a 90-day tariff pause. Reciprocal tariffs were also dropped to 10% for most countries, sparking renewed optimism amid ongoing trade talks. The major stock indices rose as investors, growing impatient of seemingly irrational tariff actions, welcomed the pause as a sign of a more measured path forward.
However, Trump was quick to note that China was not part of the pause. Instead, he prepared to raise tariffs on Chinese goods to 125% after China announced retaliatory tariffs on US imports. This tough stance on China stood in sharp contrast to the softer tone toward others. In a week marked by growing uncertainty, this news eased some of the pressure. The questions remain whether we are out of the woods and can sustain the rally or not.
Nvidia is down 24.7% since the beginning of the year, and at $104.20 per share, it is trading 30.3% below its 52-week high of $149.43 from January 2025. Investors who bought $1,000 worth of Nvidia’s shares 5 years ago would now be looking at an investment worth $14,143.
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