Nvidia stock (NVDA) fell as much as 3% early Monday after the Biden administration released an updated export rule aimed at controlling the flow of artificial intelligence to “adversaries” such as China.
The White House said the rule would cap the number of AI chips called GPUs (graphics processing units) that can be ordered by most countries without a special license to 50,000. Smaller orders of 1,700 or fewer GPUs would not count toward the export cap. Some 18 US allies, including the UK, Netherlands, and Taiwan, will face no restrictions.
“The United States must act decisively to lead this transition by ensuring that US technology undergirds global AI use and that adversaries cannot easily abuse advanced AI,” the White House said in a statement Monday.
For reference, Microsoft (MSFT) alone reportedly purchased 485,000 of Nvidia’s Hopper GPUs in 2024 alone, while Meta (META) purchased 224,000 of the AI chips, according to The Financial Times.
The rule aims to close loopholes in prior export restrictions on AI chips in 2022 and 2023 “by thwarting smuggling” and “raising AI security standards,” the White House said.
“While there have been some restrictions on chip sales already, there have been reports of advanced NVIDIA chips making it to China, likely due to the fact that NVIDIA has limited control over its resellers,” DA Davidson analyst Gil Luria told Yahoo Finance in an email.
In addition to Nvidia’s advanced chips sold through resellers, Nvidia makes specific versions of chips that comply with current US trade restrictions on China. According to the FT, Nvidia’s H20 chips — its Hopper chips for China — would not be subject to the new rule.
Nvidia CEO Jensen Huang holds a new Nvidia GeForce RTX 5090 graphics card and an RTX 5070 laptop as he gives a keynote address at CES 2025, an annual consumer electronics trade show, in Las Vegas, Nevada, U.S. January 6, 2025. REUTERS/Steve Marcus/File Photo · Reuters / Reuters
Nvidia vice president of government affairs Ned Finkle said in a statement Monday that the rule was “drafted in secret and without proper legislative review.”
“And by attempting to rig market outcomes and stifle competition — the lifeblood of innovation — the Biden administration’s new rule threatens to squander America’s hard-won technological advantage,” he said.
Companies have a longer-than-typical 120-day period to provide commentary on the restrictions, Bloomberg reported, giving the Trump administration time to make changes to the rule, which is set to go into effect in one year. Nvidia’s statement included a seeming appeal to the incoming administration.
“As the first Trump Administration demonstrated, America wins through innovation, competition and by sharing our technologies with the world — not by retreating behind a wall of government overreach,” Finkle said. “We look forward to a return to policies that strengthen American leadership, bolster our economy and preserve our competitive edge in AI and beyond.”
Story continues
In a note to investors early Monday, Bank of America analyst Vivek Arya reiterated his Buy rating on Nvidia stock but noted that the tougher export rule “muddies the waters” for the AI chipmaker.
Nvidia stock’s drop Monday extends its decline from Friday when shares dropped 3% in anticipation of the updated export controls. It is now down around 9% over the last five sessions.
The stock was also under pressure after HSBC lowered its price target on Nvidia shares to $185 from $195, citing Blackwell supply chain concerns, which it believes “could remain an overhang” through the first half of the company’s fiscal year 2026 (which occurs during the 2025 calendar year).
The Semiconductor Industry Association echoed Nvidia’s response to the rule, stating Monday: “We’re deeply disappointed that a policy shift of this magnitude and impact is being rushed out the door days before a presidential transition and without any meaningful input from industry.”
The PHLX Semiconductor (^SOX) index fell on Monday. Nvidia rival Advanced Micro Devices (AMD) and Qualcomm (QCOM) dropped slightly, while Broadcom (AVGO) was up.
StockStory aims to help individual investors beat the market.
Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance