Nvidia (NVDA) shares fell 4.5% on Tuesday, partially reversing the gains from a two-week rally and retreating from a record close achieved the previous day.
The decline in Nvidia’s stock began before the market opened, triggered by a Bloomberg report indicating that officials in the Biden administration are considering capping U.S. chip exports to certain countries. According to unnamed sources cited by Bloomberg, these potential regulations may focus on countries in the Persian Gulf due to national security concerns. This news also negatively impacted shares of other chip manufacturers, with Advanced Micro Devices (AMD) and Intel (INTC) experiencing declines. Intel declined to comment on the report, while Nvidia and AMD did not respond to inquiries from Yahoo Finance.
“Although Nvidia has not publicly disclosed its sales to the Gulf region, the level of investment in AI from that area has been substantial,” said Gil Luria, an analyst at DA Davidson, in comments to Yahoo Finance. “More critically, if the government continues to restrict the regions where chip companies can sell their products, they are effectively limiting the market for AI services for Nvidia’s customers, such as Microsoft, Google, and Amazon.”
Compounding the challenges for chip stocks was a disappointing earnings report from ASML (ASML), a key supplier of semiconductor equipment. The Dutch company, which sells equipment to Nvidia’s primary chip manufacturer TSMC and Intel, reported third-quarter bookings of just €2.6 billion ($2.8 billion), significantly below the €5.39 billion projected by Wall Street analysts tracked by Bloomberg.
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