Nvidia's shares plunge to five-month low amid cancelled China orders
A view of a Nvidia logo at their headquarters in Taipei, Taiwan
Shares of Nvidia Corp, a prominent player in the artificial intelligence (AI) industry, tumbled by nearly 5 per cent, reaching a five-month low in the wake of a report that the company may be compelled to cancel advanced chip orders valued at up to $5 billion destined for China.
According to Reuters, the reason behind this potential cancellation is the necessity to comply with new U.S. government restrictions.
Nvidia's stock price plunged to as low as $392.30, representing a 4.7 per cent decline. This marks the lowest level the company's stock has reached since mid-June. The stock, which played a significant role in driving the Nasdaq's gains, has now fallen by nearly 20 per cent from its record high close of $493.55 achieved on August 31.
Nvidia recently received notification that its AI chip orders, set for delivery to major Chinese technology firms in the next year, including giants like Alibaba Group, ByteDance (the parent company of TikTok), and Baidu, are now subject to the most recent export restrictions unveiled by the U.S. Commerce Department.
Tom Plumb, the CEO and lead portfolio manager at Plumb Funds, noted, "The stock is getting oversold," adding that Nvidia had previously indicated that the impact of these restrictions would be more long-term rather than immediate. Despite the current volatility, he still views Nvidia as a strong long-term investment.
A Nvidia spokesperson told Reuters about the "high demand" for its advanced chips, which often entail a significant lead time for production. The company is actively working on distributing orders to a broad range of customers in the United States and elsewhere, emphasising that these new export controls are not anticipated to have a significant short-term impact.
This development follows the Biden administration's imposition of export restrictions earlier this month on the shipment of AI chips designed by Nvidia and other firms to China. The objective of these restrictions is to prevent Beijing from accessing cutting-edge U.S. technologies that could potentially strengthen its military capabilities. These new regulations are scheduled to go into effect in November and encompass export controls extending to countries such as Iran and Russia.
(With inputs from Reuters)
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