AI Giants Feel the Heat
At the center of the selloff was Nvidia, which warned of a staggering $5.5 billion revenue impact due to new U.S. curbs on the export of its AI-focused H20 processor to China. The restriction also affects AMD’s MI308 chip, dealing a collective blow to the AI chip segment just as it shows signs of fatigue after a two-year bull run.
The market reaction was swift. Nvidia’s stock plunged nearly 6%, erasing over $148 billion in market capitalization. AMD dropped 5.8% after disclosing an estimated $800 million revenue hit. Other AI-adjacent chipmakers, including Arm, Broadcom, and Micron, also saw losses ranging from 2.5% to 4.6%.
“The U.S. export restrictions on Nvidia's H20 chips highlight the growing geopolitical uncertainty enveloping the tech and semiconductor sectors, particularly under Trump-era-style policy reversals,” said Michael Ashley Schulman, Chief Investment Officer at Running Point Capital. “This unpredictability rattles businesses and investment markets.”
Trade Tensions Reshape Revenue Streams
Although China’s share of Nvidia's revenue has been declining — from 21% in fiscal 2023 to around 13% last year — it remains a critical market, contributing over $17 billion. For AMD, China accounted for 24% of total sales in 2023, making it the company's second-largest market.
Bernstein analyst Stacy Rasgon noted that while the revenue hit from Nvidia's H20 ban is “not trivial,” it isn’t crippling either. "H20 performance is low, well below already-available Chinese alternatives; a ban essentially simply hands the Chinese AI market over to Huawei," Rasgon said.
The export controls are a stark reminder of the balancing act chipmakers face between technological innovation and geopolitical risk. Nvidia had recently unveiled plans to invest $500 billion in U.S.-based AI infrastructure over the next four years, in what many interpreted as a strategic nod to Trump’s economic agenda.
A Global Domino Effect
The ripple effects of the U.S. policy move were felt worldwide. In Asia, South Korean giants Samsung and SK Hynix closed down 3% and 4%, respectively. Japanese supplier Advantest, closely linked to Nvidia’s supply chain, fell 5%, making it one of the worst performers on the Nikkei.
Europe didn’t escape the fallout either, with chipmakers ASM International and Infineon Technologies each dropping over 2%.
Cloud Demand Offers a Silver Lining
Despite the turbulence, some analysts maintain a cautiously optimistic view. TD Cowen analysts pointed out that demand from hyperscale cloud providers — the core customers for Nvidia’s latest Blackwell AI systems — remains robust. “While we acknowledge the likely impact to near-term numbers, we would stress that Blackwell shipments to core hyperscale customers remain the driver of fundamentals,” they said.
Still, with Trump signaling the potential introduction of new tariffs on semiconductors and electronics, the outlook for the global chip sector remains highly uncertain. According to a Reuters report, such measures could cost American semiconductor equipment makers more than $1 billion annually.
As the dust settles, the message is clear: in a world where technology and politics are increasingly intertwined, even the most dominant players aren't immune to the aftershocks.