Nvidia, the leading semiconductor manufacturer, is facing a setback as its stock dropped by 5% to a five-month low following reports of potential cancellation of $5 billion worth of chip orders to China. The U.S. Commerce Department has imposed new export restrictions, which may affect Nvidia’s planned AI chip deliveries to Chinese tech giants such as Alibaba, TikTok owner-ByteDance, and Baidu.
The stock of Nvidia fell to $392.30, down 4.7%, reaching its lowest level since mid-June. This decline is significant as it now marks a nearly 20% drop from its record high on August 31. Market experts suggest that the stock is becoming oversold due to the news, but they remain optimistic about Nvidia’s long-term performance.
Nvidia, in response to the new export controls, has expressed that they do not anticipate a significant impact in the near term. The company stated that they are actively working to allocate orders to customers in the United States and other countries. However, the Biden administration’s export restrictions aim to prevent China from acquiring advanced U.S. technologies to strengthen its military capabilities.
Analysts highlight that Nvidia’s stock is highly priced, making it susceptible to major impacts from any setbacks. The company’s spokesperson has confirmed the high demand for advanced chips but also acknowledged the need for significant lead time in production.
It is worth noting that the new export controls will take effect in November and will also include restrictions on shipments to countries such as Iran and Russia. This move by the U.S. government signifies its continued efforts to protect sensitive technologies from falling into the wrong hands.
As Nvidia navigates these challenges, investors and market participants will closely monitor the company’s response and its ability to reallocate orders to alternative markets. While the short-term implications are uncertain, many experts believe that Nvidia’s strong market position and technological advancements will contribute to its long-term success.
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