Why Nvidia Stock Just Dropped
Key Points
Yesterday it sounded like China would buy H200 AI chips from Nvidia.
Today it sounds like they actually won't.
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Easy come, easy go.
Shares of AI superstar Nvidia (NASDAQ: NVDA) stock touched a new all-time high on Thursday after reports from the Trump-Xi summit in China confirmed the U.S. will permit Nvidia to sell H200 artificial intelligence chips to as many as 10 Chinese companies.
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Now new reports are filtering out -- and according to these, despite receiving permission to sell, no actual sales of H200 chips were made. Nvidia stock dropped 4% through 10:05 a.m. ET on the news.
Image source: Getty Images.
No news is bad news in China
WSJ broke the story this morning, quoting President Trump saying that the Chinese companies did not buy Nvidia's chips "because they chose not to. They want to try and develop their own." What's more -- and perhaps more to the point -- Chinese authorities are reported to have not "authorized" the companies to buy Nvidia's chips.
Granted, this may just be posturing on China's part. Authorization may still be granted, and sales may emerge in days to come. Still, it doesn't sound particularly propitious for Nvidia today, which is why the stock's down a bit.
What's next for Nvidia
And yet, I'd argue the lack of sales over a few-day timespan is more of a hiccup for Nvidia than even a speedbump -- and far from a disaster. When you recall all the stories we've seen about Chinese companies going to great lengths to get access to Nvidia chips -- up to and including smuggling servers from Super Micro Computer (NASDAQ: SMCI) to get access to their Nvidia chips -- I'd say the demand is clearly there.
The real question is whether China will allow its companies to slake their thirst for Nvidia chips, or insist they buy domestic to boost Chinese industry. Either way, I suspect Nvidia will do just fine.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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