(News Bulletin 247) – The graphics card designer’s stock lost 4.7% on Tuesday, erasing around $80 billion in market capitalization. The stock was weighed down by new measures from the American administration to limit sales of graphics chips to China.

Nvidia may rank as the sixth largest company in the world in terms of market capitalization, but it remains subject to political risk and the strategic choices of Washington.

Tuesday’s session clearly demonstrated this. The specialist in graphics processors, which has seen its activity and its stock price (+200% since the start of the year) be propelled by the rise of generative artificial intelligence (AI) this year, has abandoned 4, 7%. A fall which even reached more than 7% at the start of the session, and which erased around 80 billion dollars of market capitalization at the close.

The cause is a new turn of the screw in American regulations which aims to penalize the graphics processors (GPUs) that Nvidia sells to China.

China represents 20% of revenues

At the end of 2022, the Biden administration took a wave of measures to force companies to obtain the green light from the US Department of Commerce to export the most advanced semiconductors to China. The aim is to slow down the country’s progress in artificial intelligence (AI) technologies, particularly in military and scientific applications which are obviously very sensitive on a geopolitical level.

Nvidia then adapted by producing versions dedicated to the Chinese market of its AI chips, the A800 and the H800, which fell below the minimum performance thresholds on which the restrictions applied. Recall that in the second quarter of 2023, China represented approximately 20% of Nvidia’s revenues, for a total of $2.74 billion.

But the American administration decided on Tuesday to tighten the noose, by further limiting in terms of power the semiconductors which can be exported to China without prior license. These new rules, which certainly do not specifically target Nvidia, will probably still be updated once a year to prevent any loopholes, explained Commerce Department Secretary Gina Raimondo, cited by Reuters.

The aim is not to harm Beijing economically but to limit China’s access to “advanced semiconductors that could power breakthroughs in artificial intelligence and sophisticated computers that are essential for (Chinese) military applications,” she said.

No impact on finances in the short term

In a declaration made to the SEC, the American stock market watchdog, Nvidia indicated that its A800 and H800 processors fell within the scope of this new legislation.

These new rules will come into effect within 30 days and “given the strong demand for our products around the world, we do not believe that (these) additional restrictions will have a significant short-term impact on our financial results” , explains Nvidia. The group is indeed facing such a boom for its technologies that it manages to sell every processor manufactured.

But these new restrictions “may impact the company’s ability to complete product development in a timely manner, support existing customers or supply customers of covered products outside of affected regions and could require the company to transfer certain activities outside one or more identified countries,” the company continues.

“While the restrictions may not significantly affect near-term estimates, they may erode Nvidia’s long-term prospects,” said Kunjan Sobhani of Bloomberg Intelligence.

According to Bloomberg, Morgan Stanley for its part reduced its price target on Nvidia citing “draconian” export controls on the part of the Biden administration.