Nvidia Stock Falls. Reasons to Look Past China Fears.

Nvidia chips are the favored choice for training artificial-intelligence models. (Dreamstime)

Key Points

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• Nvidia shares edged down 0.2% to $177.41 premarket, while AMD and Broadcom rose, as the market weighed Nvidia’s China sales prospects.
• China’s regulator found Nvidia violated antimonopoly laws related to its Mellanox acquisition, impacting its ability to sell advanced chips there.
• Google plans to invest £5 billion in UK AI development, as robust investment should underpin AI growth, according to UBS.

Nvidia stock was edging down early Tuesday as the market assessed the chip maker’s chances of being able to resume sales in China.

Nvidia shares were down 0.5% at $176.87 in early trading. The stock was broadly flat on Monday.

Nvidia’s drift could be due to the finding from China’s State Administration for Market Regulation that the company had violated Beijing’s antimonopoly laws, disclosed on Monday. Nvidia said it complies with the law and will cooperate with government agencies.

Beijing’s antitrust regulator said the breach was related to commitments made by Nvidia when it acquired Israeli networking technology company Mellanox for $6.9 billion in 2020. The regulator said the investigation was continuing, and it didn’t elaborate on the preliminary findings or say whether it would punish Nvidia.

While the ruling is a blow to Nvidia’s aspirations to resume sales of its H20 chips in China and to begin selling its more advanced Blackwell processors in the country, the company has already removed Chinese sales from its forecasts.

“Investors should look past these moves and instead treat them as the new norm. We also note dialogue between the nations should be viewed positively for the likes of Nvidia and AMD, which patiently await ramping AI products into the region,” wrote CFRA Research analyst Angelo Zino in a research note.

Meantime, there are plenty of signs that spending on artificial-intelligence chips will grow elsewhere. Alphabet’s Google said Tuesday it would spend £5 billion ($6.80 billion) on AI development in the U.K. over the next two years.

“Robust investment and encouraging monetization should continue to
underpin AI growth,” wrote Mark Haefele, chief investment officer at UBS Global Wealth Management in a research note on Tuesday. “We think the next leg of growth will likely come from continued inferencing growth, broader AI adoption, and agentic AI, which can make decisions and take actions to achieve a goal without needing step-by-step instructions.”

Among other chip makers, Advanced Micro Devices was down 0.4% and Broadcom was dropping 0.2% in premarket trading.

Write to Adam Clark at adam.clark@barrons.com