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Nvidia shares fall after Chinese order cancellation report

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The NVIDIA logo as seen at the company’s headquarters in Santa Clara, California, in May 2022. Courtesy of NVIDIA/Handout via REUTERS/File Photo Obtaining licensing rights

NEW YORK (Reuters) – Shares of Nvidia Corp (NVDA.O) fell about 5% to their lowest level in nearly five months on Tuesday after a Wall Street Journal report that the artificial intelligence (AI) giant may have to cancel up to 5 Billions of dollars in advanced chip orders to China in compliance with new US government restrictions.

Nvidia was notified last week that AI chip orders scheduled for delivery next year to major Chinese tech companies, including Alibaba Group (9988.HK), TikTok-owner ByteDance and Baidu (9888.HK), are subject to the latest export restrictions announced by Nvidia. . The Wall Street Journal, citing people familiar with the matter, reported that the US Department of Commerce.

Nvidia stock fell to a low of $392.30, down 4.7%, to its lowest level since mid-June. The stock, which was one of the main drivers of this year’s 22% gain on the Nasdaq, is now down nearly 20% from its record closing high of $493.55 reached on Aug. 31. The latest decline was 2.09%.

“The stock is oversold,” said Tom Plumb, CEO and lead portfolio manager at Plumb Funds, which counts Nvidia as one of its largest holdings.

“Previously, Nvidia said this wouldn’t have an impact in the short term but more in the long term. We still expect a very strong quarter and think it’s a great contract long term, even though we’re not adding any new positions due to volatility,” Plumb added. .

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An Nvidia spokesperson said there is “high demand” for its advanced chips, which often require a long time to manufacture, and that it is working to allocate orders for a “broad range of customers” in the United States and elsewhere.

“These new export controls will not have a tangible impact in the near term,” an Nvidia spokesperson said in a statement.

Earlier this month, the Biden administration imposed restrictions on the export to China of more AI chips designed by Nvidia and others, a move aimed at preventing Beijing from receiving the latest US technology to bolster its military.

The new rules come into effect in November and include export controls to countries including Iran and Russia.

“I think Nvidia is priced to perfection and any flight can have a huge impact when you have a stock that is trading at 20 times sales and 40 times earnings,” said Thomas Hayes, chairman of Great Hill Capital in New York.

(Reporting by Chibuike Ojoh in New York – Reporting by Gabriel for the Arabic Bulletin) Additional reporting by Stephen Nellis in San Francisco and Amruta Khandekar in Bengaluru; Edited by Lance Tupper, Michelle Price, Jonathan Oatis, and Debba Babington

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Chibuike reports on breaking news, with a focus on finance and markets. He previously covered US private equity firms, and holds a master’s degree in journalism from New York University and Edinburgh Napier University. Contact: 332-999-6154

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