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Nvidia stock price tumbles as US chip restrictions escalate


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Nvidia’s made-for-China chips, which were designed to circumvent the chip export restrictions imposed by the US government in 2022, are now hitting the wall.

original-size.webpSource: Bloomberg
 

Hebe Chen | Market Analyst, Melbourne | Publication date: Thursday 19 October 2023 07:11

Nvidia’s made-for-China chips, which were designed to circumvent the chip export restrictions imposed by the US government in 2022, are now hitting the wall. The Biden administration has escalated its efforts to curb the chip exports to China, closing the door for Nvidia’s processors—A800 and H800 chips that tailored specifically for the Chinese market.

Following the official announcement on Tuesday, the share price of the leading AI chip maker plummeted by nearly 5%. Nvidia responded to the new regulation and cautioned that the stricter rules "may impact the company’s ability to complete the development of products in a timely manner and support existing customers of covered products."

In fact, it's not just Nvidia's two chips that have been targeted, any chips falling outside the restricted threshold are now required to be reported to the US government before they can be sold to China. Additionally, countries such as Saudi Arabia, the United Arab Emirates, and Vietnam are also included in the list of nations subject to additional licensing requirements if US companies wish to sell their chips to them. This measure is aimed at closing the loopholes that third parties in these countries might exploit to resell high-end chips to China.

In 2022, Nvidia made over 7 billion US dollars from chip sales to the Chinese market, which includes mainland China and Hong Kong, surpassing their revenue generated in the United States.

Nvidia stock price technical analysis

Based on the daily chart, Nvidia's stock price is currently on the verge of breaking the impressive uptrend that began in January 2023, resulting in a remarkable increase of over 200% so far. However, since reaching its peak in August, briefly touching above $500, it has experienced a nearly 15% downturn over the past two months.

If the price continues to fall below the range of $425-$436, there is a growing probability that it may keep sliding to around $400-$407, a level that would complete the head-and-shoulders pattern and potentially open the floor if the price breaches this level. On the flip side, the near-term resistance is situated at around $450.

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