Nasdaq 100: Nvidia Drops 6% as U.S. Weighs New AI Chip Restrictions on China

Nvidia Slides as Trump Administration Weighs New China Chip Restrictions

Nvidia shares tumbled 6% Wednesday following reports that the Trump administration is considering new restrictions on the company’s chip sales to China. The potential curbs, which are still in early discussions, could expand existing restrictions to include Nvidia’s H20 chips. These chips were designed to comply with current U.S. regulations but still enable artificial intelligence (AI) development.

The news comes amid growing concerns over China’s ability to advance its AI capabilities using U.S. technology. Trump’s nominee for Commerce Secretary, Howard Lutnick, signaled a tough stance on semiconductor exports, vowing to strengthen oversight of AI-related chip sales. Nvidia, a dominant force in AI chip production, has already faced significant restrictions under the Biden administration, and further limitations could weigh on its future revenue from China.

Why Is Nvidia Under Pressure?

Nvidia has been at the center of U.S.-China tech tensions due to its critical role in AI advancements. The emergence of China’s DeepSeek AI model has intensified scrutiny, with Lutnick accusing China of leveraging stolen U.S. technology and semiconductors to create competitive AI models at a fraction of the cost.

DeepSeek’s AI app recently surged to the top of Apple’s App Store rankings, surpassing OpenAI’s ChatGPT. The company claims it trained its latest AI models on just $5.6 million and a limited supply of Nvidia chips, raising doubts about whether it adhered to U.S. export controls. Lutnick has pledged to investigate and potentially tighten restrictions on AI-related chip exports to prevent U.S. technology from fueling China’s AI sector.

How Are Markets Reacting?

Nvidia’s stock has declined more than 14% this week, reflecting investor anxiety over escalating trade tensions and regulatory uncertainty. While the company remains a leader in AI chip production, tighter restrictions on Chinese sales could impact its revenue, given that China accounts for a significant portion of its business.

Broader markets also felt the pressure, with the Nasdaq 100 underperforming as investors reassessed AI-driven growth stocks. Semiconductor stocks, including AMD and Intel, also slipped as traders weighed the potential impact of stricter trade policies on the industry.

What’s Next for Traders?

With discussions in the early stages, no immediate policy changes are expected, but traders will closely watch further statements from Lutnick and the Commerce Department. Any official restrictions on Nvidia’s H20 chips could further weigh on the stock and impact sentiment across the semiconductor sector.

Additionally, traders should monitor developments in U.S.-China relations, particularly any new trade measures that could disrupt supply chains. Earnings reports from key tech companies and updates on AI regulation will also be critical catalysts for market direction in the coming weeks.

More Information in our Economic Calendar.