The NVIDIA logo as seen at the company’s headquarters in Santa Clara, California in May 2022. Courtesy of NVIDIA/Handout via Portal/File Photo Acquire Licensing Rights
NEW YORK, Oct 31 (Portal) – Shares of Nvidia Corp (NVDA.O) fell about 5% on Tuesday to a nearly five-month low after The Wall Street Journal reported that the artificial intelligence (AI) giant could potentially be forced to cancel chip orders to China worth up to $5 billion in line with new U.S. government restrictions.
Nvidia was informed last week that it has placed orders for AI chips to be delivered next year to major Chinese tech companies including Alibaba Group (9988.HK), TikTok owner ByteDance and Baidu (9888.HK), Nvidia’s newest announced export restrictions The US Commerce Department reported, citing people familiar with the matter, the Wall Street Journal reported.
Nvidia shares fell to as low as $392.30, down 4.7% and their lowest level since mid-June. The stock, which was a key driver of this year’s 22% rise in the Nasdaq index, has fallen nearly 20% since its record close of $493.55 on August 31. Most recently it had fallen by 2.09%.
“The stock is oversold,” said Tom Plumb, CEO and lead portfolio manager at Plumb Funds, whose largest holdings include Nvidia.
“Nvidia has previously said that this will not have a short-term impact, but rather a long-term impact. “We still expect a pretty strong quarter and think it’s a great long-term holding, although we’re not adding any new positions due to the volatility,” Plumb added.
An Nvidia spokesman said there is “high demand” for its advanced chips, which often require significant lead time to produce, and that the company is working to distribute orders to its “broad range of customers” in the U.S. and elsewhere.
“These new export controls will not have a significant short-term impact,” the Nvidia spokesperson said in a statement.
Earlier this month, the Biden administration imposed export restrictions on shipments of additional AI chips developed by Nvidia and others to China. This is intended to prevent Beijing from receiving the most modern US technologies to strengthen its military.
The new rules come into force in November and include export controls for countries such as Iran and Russia.
“I think that Nvidia is priced to perfection and that any deviation can have a big impact when you have a stock that trades at 20 times sales and 40 times earnings,” said Thomas Hayes, chairman from Great Hill Capital in New York.
Reporting by Chibuike Oguh in New York; additional reporting by Stephen Nellis in San Francisco and Amruta Khandekar in Bengaluru; Editing by Lance Tupper, Michelle Price, Jonathan Oatis and Deepa Babington
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