Following a Wall Street Journal report on October 31, 2023, artificial intelligence (AI) giant Nvidia Corp. may be forced to cancel up to $5 billion in chip pre-orders to China. This is due to new restrictions imposed by the U.S. government.
As a result, Nvidia Corp. (NVDA) shares lost about 5% of their value and hit a five-month low on Tuesday.
Last week, Nvidia received official notification that orders and shipments of AI chips planned for next year for major technology companies in China are subject to government export restrictions.
Orders from Alibaba Group, TikTok, ByteDance, and Baidu will be affected. Such a requirement is set by the U.S. Department of Commerce.
Nvidia shares are currently trading at $407.80, nearing a low since mid-June. NVDA stock has been a major driver of the Nasdaq index's 22% gain in 2023, but is now down nearly 20% from its high of $493.55 on Aug. 31.
"The stock is now oversold," said Tom Plumb, CEO of Plumb Funds.
He recalled, "Nvidia has previously said that this will not have a short-term impact but could have a long-term impact. We still expect a pretty strong report this quarter.
Nvidia said there is high demand for its advanced chips, which often take a significant amount of time to manufacture. The company is now working to distribute orders to customers in the U.S. and other countries.
"The new export controls will not have a material impact in the near term," an Nvidia spokesman said.
NVDA's earnings expectations for the next quarter are $3.33 in a range of $2.38 to $3.69. Last quarter, earnings per share were $2.70.
NVDA stock has beaten EPS estimates 75% of the time over the past 12 months, while the industry as a whole has beaten EPS estimates 61.74% of the time over the same period. NVDA has outperformed its industry over the past calendar year.
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