Today: 16-04-2024

Nvidia Faces Market Turbulence: Share Prices Plummet Amid Reports of Canceled Orders in China

"Market Turbulence: Nvidia Shares Plunge on Reports of Cancelled China Orders"

NEW YORK, Oct 31 (Reuters) — Nvidia Corp (NVDA.O) faced a sharp decline in shares, dropping nearly 5% to a near five-month low on Tuesday following reports by the Wall Street Journal. The article indicated that the artificial intelligence (AI) giant might be compelled to cancel up to $5 billion worth of advanced chip orders destined for China, aligning with new U.S. government restrictions. Nvidia received notification last week about AI chip orders slated for delivery in the next year to major Chinese tech players such as Alibaba Group (9988.HK), ByteDance (owner of TikTok), and Baidu (9888.HK), which are now subject to the latest export restrictions declared by the U.S. Commerce Department.

Nvidia's stock plummeted to $392.30, marking a 4.7% decline and reaching its lowest level since mid-June. As a significant contributor to this year's 22% gain in the Nasdaq index, Nvidia's stock has now receded almost 20% from its record high close of $493.55 on Aug. 31. Despite the dip, it was last down 2.09%.

Tom Plumb, Chief Executive and Lead Portfolio Manager at Plumb Funds, emphasized the stock's oversold status, stating that Nvidia had previously downplayed any short-term impact and asserted that the challenges were more long-term. Plumb, while acknowledging the volatility, expressed confidence in Nvidia's resilience, describing it as a great long-term holding.

A spokesperson for Nvidia addressed the situation, highlighting the "high demand" for their advanced chips and assuring that efforts were underway to allocate orders to a diverse customer base in the United States and globally. The spokesperson dismissed concerns about the new export controls, asserting that they would not have a meaningful impact in the near term.

In early October, the Biden administration implemented export restrictions on the shipment of AI chips, including those designed by Nvidia, to China. The move aimed to prevent Beijing from acquiring cutting-edge U.S. technologies that could bolster its military capabilities. These new rules, effective from November, also included export controls on shipments to countries such as Iran and Russia.

Analysts weighed in on Nvidia's situation, with Thomas Hayes, Chairman at Great Hill Capital in New York, noting that Nvidia's stock, previously perceived as near perfection, could be significantly impacted, especially given its high valuation at 20 times sales and 40 times earnings. As the market navigates these challenges, the fate of Nvidia's stock remains a focal point of concern and scrutiny.

Attribution and Contact Information:

Reporting by Chibuike Oguh in New York; with additional contributions by Stephen Nellis in San Francisco and Amruta Khandekar in Bengaluru. Edited by Lance Tupper, Michelle Price, Jonathan Oatis, and Deepa Babington.

Chibuike Oguh specializes in Breaking News, with a particular emphasis on finance and markets. His previous coverage includes U.S. private equity firms. Chibuike holds master's degrees in journalism from New York University and Edinburgh Napier University. For further contact, please reach out to 332-999-6154.

Our Standards: The Thomson Reuters Trust Principles.

In conclusion, the challenges faced by Nvidia, marked by a significant drop in shares following reports of potentially canceled chip orders to China, underscore the intricate dynamics of the global tech market. The repercussions of new U.S. government restrictions on exports to China have left Nvidia navigating a complex terrain. The company's stock decline, though substantial, prompts varied analyses from experts, with Tom Plumb expressing confidence in Nvidia's long-term resilience, while Thomas Hayes highlights the vulnerability of a stock perceived as near perfection.

As the situation unfolds, the fate of Nvidia's shares becomes a focal point of scrutiny, mirroring the broader impact of geopolitical tensions on the tech industry. The concluding details provide insights into the contributors behind the Reuters report, acknowledging the journalists involved and offering contact information for further inquiries. In the ever-evolving landscape of tech and finance, the story of Nvidia's shares serves as a nuanced snapshot of the challenges and uncertainties facing the sector.