Nvidia Stock Forecast: NVDA weakens as Washington seeks to limit Chinese access to AI chips

Nvidia stock sells off at the beginning of Friday’s session.
President Joe Biden’s administration intends to bar foreign units of Chinese companies from accessing Nvidia’s H100 and A100 GPUs.
NVDA stock has been rising for more than three weeks now.
Chinese companies have been remotely accessing AI chip technology, according to Reuters.
US market climbs on bank stocks outperforming consensus for the third quarter.

Nvidia’s (NVDA) stock price dropped 3% on Friday after Reuters reported that the Biden administration attempted to close a loophole that allows Chinese companies to gain access to state-of-the-art computer chips used for artificial intelligence (AI). In particular, Nvidia’s H100 Tensor Core GPU could be hurt by the new regulations.

Nvidia stock moved in opposition to the Dow Jones, which gained ground due to JPMorgan (JPM), Citigroup (C) and Wells Fargo (WFC) earnings results that proved much better than Wall Street consensus. The NASDAQ Composite and the S&P 500 ignored the banks' success and moved lower.

Nvidia stock news: Chinese corporation’s overseas units may also face AI chip ban

Last autumn, the Biden administration decided to get tough on China by banning exports of Nvidia’s H100 and A100 GPUs to the mainland, both of which are used in generative AI as well as military applications. In addition, Advanced Micro Devices’ (AMD) MI250 accelerator chip was also affected by the ban. At the time, Nvidia said the new regulations would cost it as much as $400 million in sales.

However, according to Reuters, the administration is now aware of mainland companies accessing the AI chips via a loophole that permits overseas units of Chinese companies to still procure the products. The foreign subsidiaries then either ship the chips illegally to the mainland or allow their companies to access the chip technology remotely though the infrastructure operates far outside China.

As per Reuters: “[T]he very chips barred by US regulations could be purchased from vendors in the famed Huaqiangbei electronics area in the southern Chinese city of Shenzhen.”

It is unclear exactly how Washington can completely wall off China from this AI technology however. Chinese corporations are already accessing the technology through third parties like Amazon Web Services, who utilize these chips in their industry-leading data centres.

Nvidia FAQs

What is Nvidia known for?

Nvidia is the leading fabless designer of graphics processing units or GPUs. These sophisticated devices allow computers to better process graphics for display interfaces by accelerating computer memory and RAM. This is especially true in the world of video games, where Nvidia graphics cards became a mainstay of the industry. Additionally, Nvidia is well-known as the creator of its CUDA API that allows developers to create software for a number of industries using its parallel computing platform. Nvidia chips are leading products in the data center, supercomputing and artificial intelligence industries. The company is also viewed as one of the inventors of the system-on-a-chip design.

What is the history of Nvidia?

Current CEO Jensen Huang founded Nvidia with Chris Malachowsky and Curtis Priem in 1993. All three founders were semiconductor engineers, who had previously worked at AMD, Sun Microsystems, IBM and Hewlett-Packard. The team set out to build more proficient GPUs than currently existed in the market and largely succeeded by late 1990s. The company was founded with $40,000 but secured $20 million in funding from Sequoia Capital venture fund early on. Nvidia went public in 1999 under the ticker NVDA. Nvidia became a leading designer of chips to the data center, PC, automotive and mobile markets through its close relationship with Taiwan Semiconductor.

What is Nvidia’s relationship to artificial intelligence?

In 2022, Nvidia released its ninth-generation data center GPU called the H100. This GPU is specifically designed with the needs of artificial intelligence applications in mind. For instance, OpenAI’s ChatGPT and GPT-4 large language models (LLMs) rely on the H100’s high efficiency in parallel processing to execute a high number of commands quickly. The chip is said to speed up networks by six times Nvidia’s previous A100 chip and is based on the new Hopper architecture. The H100 chip contains 80 billion transistors. Nvidia’s market cap reached $1 trillion in May 2023 largely on the promise of its H100 chip becoming the “picks and shovels” of the coming AI revolution.

Why does Jensen Huang have a cult following?

Long-time CEO Jense Huang has a cult following in Silicon Valley and on Wall Street due to his strict loyalty and determination to build Nvidia into one of the world’s leading companies. Nvidia neary fell apart on several occasions, but each time Huang bet everything on a new technology that turned out to be the ticket to the company’s success. Huang is seen as a visionary in Silicon Valley, and his company is at the forefront of most major breakthroughs in computer processing. Huang is known for his enthusiastic keynote addresses at annual Nvidia GTC conferences, as well as his love of black leather jackets and Denny’s, the fast food chain where the company was founded.

Nvidia stock chart: MACD crossover shows uptrend still in motion

At the time of writing, Nvidia stock is down 0.8% to $465 per share. Investors need not worry though. Nvidia is continuing its uptrend that began after the stock bottomed out just below $410 on September 21. That means NVDA has been gradually advancing for three and a half weeks now, and there really is not sign that the party is about to end.

The Moving Average Convergence Divergence (MACD) indicator has been in a bullish crossover for a while now. The $470 range that acted as resistance on NVDA’s way down in late July could emerge as resistance once again. But the main trend here is a widening upward trend channel.

NVDA stock has already reached that top trendline four times over the course of this year. A fifth time would bring the premier semiconductor stock up to the vicinity of $550. With the MACD breaking above the zero threshold, that 18% leap does not seem improbable.

NVDA daily chart

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