Nvidia (NVDA) stock fell roughly 4% early Wednesday as news from Wall Street and Washington spurred fears of moderating AI demand and tightening chip trade rules from the Trump administration.
Nvidia customer Super Micro Computer (SMCI), which makes servers using Nvidia’s designs to sell to data center operators and tech firms, cut its revenue and profit outlook for the third quarter — the latest news to signal a wider potential pullback in demand for AI infrastructure.
Super Micro stock dropped 18% on Wednesday morning.
Tech stocks were also under broad pressure amid a market sell-off spurred by negative news early Wednesday on US economic growth and the state of the labor market.
Another challenge for Nvidia stock, according to analysts, is further potential changes from the Trump administration to AI chip export rules. Reuters reported late Tuesday that Trump officials are working to change a Biden-era AI trade rule capping access to US AI chips, potentially making it stricter.
Big Tech has called on Trump to scrap the so-called AI diffusion rule passed by Biden in January during his final days in office. This rule would restrict chip exports by country using a tiered system.
Aside from 18 “key” US allies (i.e., “tier one”), the rule capped the amount of AI chips that roughly 150 countries can purchase from US companies without obtaining a special license with the aim of thwarting chip smuggling to China.
Read more about stock moves and today’s market action.
These “tier two” countries include Israel, Switzerland, and India. “Tier three” countries such as China, North Korea, and Iran are already blacklisted from the US chip trade. The AI diffusion rule would go into effect in May.
Reuters reported Trump administration officials are weighing discarding the tiered approach and instead using a global licensing regime with government-to-government agreements, making the rule possibly more restrictive.
Citi analyst Atif Malik wrote in a note to investors late Tuesday that “these modifications, if true, would be potentially more strict than Biden’s as they would put AI chips at the center of tariff negotiations.” In Malik’s view, this would create more uncertainty for the stock.
Bernstein’s Stacy Rasgon said in his own note the existing rules seemed, in his view, “onerous and capricious … replacing a global framework with individually negotiated bilateral agreements seems clearly worse.”
Rasgon added, “[G]iven increasing decoupling of the US from the rest of the world we see potential risk that such rules open up further opportunities for non-US options like Huawei, who (even though uncompetitive head-to-head) could be seen as more viable if they become the only option available (we are about to see this in China anyway given the recent H20 ban).”
