Nvidia Corp (NASDAQ:NVDA, ETR:NVD) shares fell 1.3% in premarket trading on Wednesday after Chinese regulators reportedly extended a ban on the country’s technology giants from buying AI chips from the US company.
According to a Financial Times report, the Cyberspace Administration of China said the companies, including TikTok owner ByteDance and e-commerce giant Alibaba Group (NYSE:BABA), should stop testing and ordering special China-only AI chips that Nvidia makes with slightly limited capabilities.
Several companies, the report said, had previously planned large orders of the RTX Pro 6000D chip, then told their suppliers to halt work after getting the watchdog's instruction.
The new ban "goes beyond earlier guidance" that focused on Nvidia’s other China-only chip, the H20, which is also used for AI.
Chinese regulators concluded that domestically made chips had attained performance comparable to those of the models, the report said.
Chris Beauchamp, IG analyst, says: "Investors were already on edge ahead of today's Fed meeting, but jitters will heighten further on this news about China and Nvidia.
"The shares have struggled for direction since the latest earnings report, and today's news puts further pressure on this market darling, given that around 40% of its sales are to China.
"There might be ways round a US export ban for Chinese companies, but a domestically-imposed one is much harder to avoid."