Nvidia stock tumbles on a report the chip titan could face tighter regulation in China
Getty Images; Chelsea Jia Feng/BI
- Nvidia stock fell close to 5% on Wednesday morning.
- The Financial Times reported that China was raising restrictions on chips.
- This could damage Nvidia's business. China makes up 13% of total annual sales, the FT said.
The move: Nvidia sank 4.54% Wednesday morning, dropping to $115 per share by 10:35 a.m. ET. The flagship semiconductor firm is down 14.24% this year.
Why: A report from the Financial Times says the chipmaker is at risk of losing business in China, which accounts for $17.1 billion in annual revenue for the company.
The threat has arisen after Beijing introduced new energy efficiency rules that would effectively remove a best-selling Nvidia processor from the Chinese market.
The FT reported that the government was encouraging Chinese groups to build data centers with chips that meet tighter energy requirements not satisfied by Nvidia's technology. Its H20 chip, a processor originally designed to satisfy US export controls put in place on China, wouldn't be permissible under the new rules.
What it means: While Chinese demand for the H20 chip has remained strong for several months, sources told the FT that regulators had pushed Chinese tech giants to forgo the Nvidia processor.
This poses a direct threat to Nvidia's business in China, which makes up 13% of its total sales. At the same time, the top US chipmaker is dealing with rising competition in the country, as Chinese tech giants catch up to American AI peers using cheaper and older processors. This has raised concerns about the need for Nvidia's hardware, and the massive spending of US tech leaders as they pursue their AI ambitions.
Nvidia is working to address China's rules. The FT reported that the company was looking to speak with senior executives and was working on H20 adjustments that would make the chip satisfy the new requirements.