Nvidia stock falls after Biden administration releases updated export rule for AI chips
Nvidia stock (NVDA) fell nearly 2% Monday after the Biden administration released an updated export rule aimed at controlling the flow of artificial intelligence chips to “adversaries” such as China.
The White House said the rule would cap the amount of AI chips called GPUs (graphics processing units) that can be ordered by most countries without a special license. Smaller orders of 1,700 or fewer GPUs would not count toward the export cap.
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“Artificial intelligence is quickly becoming central to both security and economic strength,” the White House said in a statement Monday. “The United States must act decisively to lead this transition by ensuring that U.S. technology undergirds global AI use and that adversaries cannot easily abuse advanced AI.”
Some 18 “key” US allies, including the UK, Netherlands, and Taiwan, will face no restrictions on shipments of AI chips, and 24 countries that are subject to arms controls — such as China, North Korea, and Russia — still face an outright ban on receiving exports of the latest AI chips.
The primary significance of the updated restrictions is in their cap on the amount of compute capacity in a given group of AI chips that can be shipped to the remaining countries in the world.
US companies can ship AI chips with a total compute capacity of 790 transistors per square millimeter, which refers to the amount of tiny electrical components on a given semiconductor, or “transistor density” to those countries, Bernstein wrote in a note to investors Monday.
That’s equivalent to roughly 50,000 Nvidia Hopper chips or 20,000 of its latest Blackwell chips, Bernstein analyst Stacy Rasgon said. The countries subject to this cap include US allies like Switzerland and Israel.
The rule aims to close loopholes in prior export restrictions on AI chips in 2022 and 2023 “by thwarting smuggling” and “raising AI security standards,” the White House said.
“[These restrictions] will make it even more difficult for Chinese entities to purchase the most advanced NVIDIA chips,” DA Davidson analyst Gil Luria told Yahoo Finance in an email Monday.
“While there have been some restrictions on chip sales already, there have been reports of advanced NVIDIA chips making it to China, likely due to the fact that NVIDIA has limited control over its resellers,” Luria explained in an earlier email last week.
In addition to Nvidia’s advanced chips sold through resellers, Nvidia makes specific versions of chips that comply with current US trade restrictions on China. Sales of Nvidia’s H20 chips — its Hopper chips for China — “should be unaffected by the controls,” Rasgon wrote in the note.
Nvidia CEO Jensen Huang holds a new Nvidia GeForce RTX 5090 graphics card and an RTX 5070 laptop as he gives a keynote address at CES 2025, an annual consumer electronics trade show, in Las Vegas, Nevada, U.S. January 6, 2025. REUTERS/Steve Marcus/File Photo ·Reuters / Reuters
Nvidia vice president of government affairs Ned Finkle said in a statement Monday that the rule was “drafted in secret and without proper legislative review.”
“And by attempting to rig market outcomes and stifle competition — the lifeblood of innovation — the Biden administration’s new rule threatens to squander America’s hard-won technological advantage,” he said.
“As the first Trump Administration demonstrated, America wins through innovation, competition and by sharing our technologies with the world — not by retreating behind a wall of government overreach,” Finkle said. “We look forward to a return to policies that strengthen American leadership, bolster our economy and preserve our competitive edge in AI and beyond.”
In a note to investors early Monday, Bank of America analyst Vivek Arya reiterated his Buy rating on Nvidia stock but noted that the tougher export rule “muddies the waters” for the AI chipmaker. Citi analyst Atif Malik said that while the news was “not too surprising,” the new 50,000 GPU export cap on 120 countries presents “risks” to Nvidia’s sales of GPUs for data centers, which make up the vast majority of Nvidia revenue.
Nvidia stock’s drop Monday extends its decline from Friday, when shares dropped 3% in anticipation of the updated export controls. It is now down around 9% over the last five sessions.
The stock was also under pressure after HSBC lowered its price target on Nvidia shares to $185 from $195, citing Blackwell supply chain concerns, which it believes “could remain an overhang” through the first half of the company’s fiscal year 2026 (which occurs during the 2025 calendar year).
The Semiconductor Industry Association echoed Nvidia’s response to the rule, stating Monday, “We’re deeply disappointed that a policy shift of this magnitude and impact is being rushed out the door days before a presidential transition and without any meaningful input from industry.”
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Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
