Nvidia (NVDA) stock fell more than 4% on Tuesday, partially reversing two weeks of gains and falling from the previous day’s record closing price.
The decline in stocks began before the market opened following a Bloomberg report that Biden administration officials were considering restricting U.S. semiconductor exports to certain countries. Bloomberg reported, citing unnamed sources, that restrictions may be focused on Persian Gulf countries for national security reasons.
Shares of fellow chipmakers Advanced Micro Devices (AMD) and Intel (INTC) also fell on this news. Intel declined to comment on the report. Nvidia and AMD did not immediately respond to requests from Yahoo Finance.
“While NVDIA does not disclose sales to the Gulf region, the level of investment in AI from the region is significant,” DA Davidson analyst Gil Luria told Yahoo Finance. “More importantly, if the government continues to narrow down where chip companies can sell, it will significantly narrow the market for AI services for NVDIA’s customers Microsoft, Google, and Amazon.”
A dismal earnings report from semiconductor equipment supplier ASML (ASML) on Tuesday also added to chip stocks’ woes. The Dutch company, which sells equipment to Intel as well as Nvidia chipmaker TSMC, reported third-quarter pre-orders worth just 2.6 billion euros ($2.8 billion), which is That was far below the 5.39 billion euros expected by Wall Street analysts tracked by Bloomberg.
The PHLX Semiconductor Index (^SOX) fell 4.4% on Tuesday, well below the S&P 500 Index (^GSPC), which was down 0.5% at midday.
Nvidia’s decline on Tuesday partially reversed a two-week winning streak that saw the stock rise to a new record close on Monday and nearly overtake Apple (AAPL) as Wall Street’s most valuable company. The stock’s closing price on Monday was above $138, higher than the $135.58 recorded in June. Nvidia’s tears were further fueled by intense demand for the company’s AI chips and comments from industry leaders about renewed bullishness on AI.
NVIDIA’s stock price has become even more volatile since its 10-for-1 stock split in June, and news of rising trade tensions focused on the NVIDIA-led AI chip sector has been the most significant over the past two years. It has repeatedly pushed down stock prices. For example, before extending its historic rally, Nvidia stock experienced a similar decline around this time last year when the Biden administration tightened export controls on U.S. chips.
Despite Tuesday’s decline, Nvidia stock is up 186% from last year. Demand for the company’s AI chips is strong in the near term, but geopolitical risks and a potential slowdown in AI spending by Big Tech companies are also a concern for investors. DA Davidson’s Gil Luria recently told Yahoo Finance that AI spending could ease as early as 2025, which would be bad news for Nvidia stock.
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Nvidia is scheduled to announce its financial results on November 19th. Wall Street analysts expect the company’s revenue to rise 82% from a year ago to $33 billion, according to Bloomberg consensus estimates. Roughly 90% of Wall Street analysts covering the stock tracked by Bloomberg recommend Nvidia stock as a buy.
Laura Bratton is a reporter for Yahoo Finance. X Follow her at @LauraBratton5.
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