Nvidia shares slipped over 1% in pre-market trading after the Financial Times reported that China’s internet regulator has banned the country’s biggest technology companies from buying its artificial intelligence chips.
The move adds to ongoing pressure on the stock, which has been weighed down by regulatory scrutiny.
China’s State Administration for Market Regulation recently reopened an investigation into Nvidia’s 2020 acquisition of Mellanox Technologies.
While the deal was previously cleared, the review’s revival has caught investors off guard.
Antitrust inquiries often drag on for months, creating uncertainty for companies operating in sensitive sectors.
Wall Street futures traded flat to slightly lower on Wednesday as investors stayed cautious ahead of the Federal Reserve’s policy decision later in the day.
The Fed is widely expected to cut interest rates by at least 25 basis points at 2 p.m. ET, a move largely priced in after recent data pointed to a cooling labor market.
Traders will also be watching closely for the central bank’s forward guidance and updated economic projections to gauge the path of further easing.
Regulatory pressure mounts
For Nvidia, the stakes are high. If Chinese regulators determine the deal poses issues, they could impose penalties or new conditions that complicate the company’s operations in one of its most challenging markets.
Sales of the H20 chip, which was designed to meet US export restrictions, have already fallen to zero in recent earnings reports, underscoring the difficulties Nvidia faces in China.
The latest ban appears aimed at limiting foreign control over advanced technology.
According to the report, the Cyberspace Administration of China ordered companies, including Alibaba and ByteDance, to immediately halt purchases and testing of Nvidia’s AI products.
These chips, such as the RTX Pro 6000D and H20 models, have been attracting strong demand from Chinese firms seeking cutting-edge computing power.
The sudden directive highlights Beijing’s increasingly firm stance in the technology rivalry with Washington, where controls over semiconductor exports have become a central policy tool.
Analyst sees long-term strength
Despite regulatory headwinds, some analysts remain optimistic about Nvidia’s trajectory.
Last week, investment firm D.A. Davidson upgraded the stock to buy from neutral.
Analyst Gil Luria raised his price target to $210 per share from $195, citing sustained growth in AI compute demand as a key driver.
Luria acknowledged risks such as intensifying competition, demand volatility in China, and what he termed “exuberant expectations.”
However, he argued that the “overwhelming growth in demand for compute” is what ultimately matters.
“While we are not ready to endorse sell-side consensus, especially given uncertainty around China, we believe investors will look through small misses, as they have done the last couple of quarters,” he said.
The tension between short-term regulatory pressure and long-term AI demand leaves Nvidia at the centre of a volatile but closely watched global technology landscape.
The post Why Nvidia stock is in the red in pre market trading appeared first on Invezz