Nvidia Stock Dips as China Orders Halt on AI Chip Purchases

Nvidia's stock (NASDAQ: NVDA) is moving lower today as Chinese regulators instructed major technology firms to cease purchases of its AI chips, escalating concerns about the company's access to the critical Chinese market. The stock is currently 2,5% lower throiuh the morning session.

The recent directive from China's Cyberspace Administration (CAC) mandates that companies like ByteDance and Alibaba halt procurement of Nvidia's RTX Pro 6000D AI chips and cancel any existing orders. This action is part of a broader initiative by Beijing to reduce reliance on U.S. technology and foster the development of domestic semiconductor capabilities. Prior to the ban, multiple Chinese firms had been actively testing and placing significant orders for the RTX Pro 6000D, and these activities have now been suspended. The share price reflects investor apprehension regarding Nvidia's prospects within China.

Adding to Nvidia's challenges, Chinese regulators have also initiated an anti-monopoly investigation focusing on its 2020 acquisition of Mellanox Technologies. The State Administration for Market Regulation (SAMR) alleges that Nvidia did not fully comply with conditions imposed during the merger approval process. While specific penalties remain undisclosed, the investigation underscores the increased regulatory scrutiny amid ongoing trade tensions between the U.S. and China. The combination of the chip ban and the anti-monopoly probe creates a complex and potentially restrictive environment for Nvidia's operations in China.

Concurrently, China is aggressively pursuing the development of its domestic AI chip industry. China Unicom's construction of a $390 million data center in Xining, Qinghai, powered entirely by domestically produced AI chips, primarily from Alibaba's T-Head unit, exemplifies this strategic shift. This initiative aligns with Beijing's broader objective of achieving technological self-sufficiency and reducing dependence on foreign technologies. Such developments pose a direct competitive threat to Nvidia, potentially limiting its market share and revenue streams in China.