Nvidia Stock Faces Major Setbacks: Will New Export Restrictions and Market Trends Impact Its Future?

Nvidia (NVDA) experienced significant turbulence on Friday and continued its downward trend on Monday following the confirmation of new restrictions on chip exports. The company’s stock broke key technical levels, falling below its 50-day and 10-week moving averages, which marked a critical point for investors. Shares ended last week down 6%, and as of Monday, Nvidia was trading 10% below its key buy point of 146.54 from a double-bottom base. This marks yet another sell signal for the chipmaker, which has been at the forefront of the AI revolution in recent years.

Biden Administration’s New Chip Export Regulations

The biggest catalyst behind Nvidia’s recent stock drop was the Biden administration’s announcement on Monday confirming the imposition of strict curbs on chip exports. The new regulations restrict exports of advanced AI chips, limiting shipments to only 18 countries, with severe limits on the number of chips per country. Countries will also require a license for any orders exceeding 1,700 AI chips, which could drastically impact Nvidia’s revenue and growth. Ned Finkle, Nvidia’s VP of government affairs, stated that these restrictions will have a significant global impact, reshaping how America’s leading semiconductors, computers, and software are designed and marketed.

According to Oracle’s Ken Glueck, the new regulations could shrink the global chip market by as much as 80% for U.S. companies. This creates a massive risk for Nvidia, which relies heavily on the international market for its products. Additionally, concerns are mounting over potential supply chain disruptions and delays in the production of its next-generation Blackwell chips. This has led some analysts, including HSBC’s Lee Frank, to predict a “supply chain overhang” that could hurt Nvidia’s ability to meet market expectations.

Stock Performance and Technical Indicators

The decline in Nvidia’s stock price has caught the attention of many analysts. Despite dominating the AI space, the company is now seeing increased selling pressure, as indicated by rising volume in its trades. Nvidia’s Accumulation/Distribution Rating of D- suggests that fund participation remains low, and its relative strength line has started to dip.

On the technical side, Nvidia stock had been a top performer on Investor’s Business Daily’s IBD Leaderboard, with a stellar composite rating of 98, but it now faces critical headwinds. The drop below the 50-day moving average is a strong sell signal, and unless the stock rebounds significantly, it may continue its downward trend.

Blackwell Chip and AI Market Expectations

Nvidia’s Blackwell chip is one of the most anticipated products in the AI space. Last week, CEO Jensen Huang claimed that the “ChatGPT moment for general robotics” was approaching, and Nvidia’s Cosmos platform would play a major role in this revolution. However, investors had been hoping for more clarity on the ramp-up of Nvidia’s Blackwell chip and its early-stage Rubin chip.

Despite the uncertainties surrounding production and new regulations, analysts are still bullish on Nvidia’s growth prospects in the long term. FactSet data predicts Nvidia’s data center business will generate a staggering $113 billion in revenue in the year ending January, outpacing every other chip company.

Impact of Broader Market Conditions

Nvidia’s struggles are also tied to broader market challenges, including the effects of rising interest rates. December was a difficult month for Nvidia investors, especially after reports surfaced that Microsoft (MSFT), a major Nvidia customer, was not constrained by chip supply. Additionally, legal setbacks, including the dismissal of Nvidia’s appeal in a 2018 securities fraud lawsuit, added to investor uncertainty.

Concerns were also raised after Broadcom’s results revealed strong demand for its AI processors, which could signal increased competition for Nvidia. Furthermore, the announcement of tariffs from President-elect Donald Trump on goods from China, Mexico, and Canada raised alarms about future geopolitical risks that could affect Nvidia’s global supply chain.

Nvidia’s Resilience Amid Challenges

Despite the mounting pressure, Nvidia continues to show impressive earnings growth, and its stock remains one of the top picks in the semiconductor space. The company’s dominant position in the AI market, coupled with its impressive earnings per share rating of 99, suggests that it has the potential to weather these storms. Analysts at Bank of America recently called Nvidia a “generational opportunity, with a price target of 190, although technical challenges suggest caution for investors looking for an entry point.

Despite the volatility, Nvidia is expected to maintain its leadership position in the AI hardware market. Bain & Co. projects that the total addressable market for AI hardware and software will grow 40-55% annually over the next few years. Nvidia’s next-generation GPU, the GB200, is projected to see demand skyrocket by 2026, with expectations of 3 million units sold, double the demand for its H100 units in 2023.

The Road Ahead for Nvidia

Nvidia’s stock has had a remarkable run, with shares soaring to a market cap of $3 trillion, rivaling tech giants like Apple (AAPL). The company was even added to the Dow Jones Industrial Average in November, joining other Magnificent Seven stocks like Apple, Microsoft, and Amazon. However, as global export restrictions and supply chain concerns mount, the stock faces challenges that could weigh on its near-term performance.

Despite these headwinds, Nvidia’s cutting-edge AI products and strong earnings growth make it a company to watch. Investors will need to carefully monitor the stock’s technical indicators and market conditions to assess whether Nvidia can continue to lead the AI revolution or if it will face further setbacks.