Nvidia Corp.
What Happened: The U.S. government's decision to make the China chip ban rules effective immediately poured cold water on Nvidia's plans to deliver some 2024 orders in advance before the rules' earlier effective date of mid-November, Wall Street Journal reported on Monday.
The report noted some of China's biggest AI and cloud-computing companies, such as Alibaba
In the long run, it could bite not only Nvidia but also the broader semiconductor industry. Nvidia's CFO Colette Kress reportedly told earlier this year that prohibiting sales of AI chips to China would mean a permanent loss of opportunities for the U.S. chip industry.
The U.S. government's motive is to keep high-performance chips, AI tools, and other technology out of the reach of China to prevent the latter from using them to advance its military and cyberwarfare capabilities.
Why It's Important: Nvidia is the most impacted by the U.S. ban, given it is the frontrunner in supplying AI chips to customers worldwide. Thanks to its AI opportunity, the graphics processor company reported forecast-beating results for the second quarter and guided the third quarter well above the consensus estimates.
The fundamental prop provided by AI is evident in the company's stock, which has been the best-performing S&P 500 stock this year, having advanced over 180% year-to-date.
When the U.S. first imposed a less stringent set of restrictions in late 2022, Chinese companies rushed to place orders for Nvidia's less powerful A800 and H800 AI chips, which were modified to comply with the regulations. The new rules announced in mid-October this year required companies to cancel orders unless they get export licenses from the U.S. Commerce Department.
Nvidia reportedly stopped taking new orders from China for its advanced AI chips in the wake of the new restriction and is looking to rush some deliveries of previously placed orders during the rule's 30-day grace period.
In premarket trading on Tuesday, Nvidia stock fell 0.39% to $410.02, according to Benzinga Pro data.