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Following the U.S. government's decision to further restrict the sale of computer chips to China and Russia, Nvidia (NASDAQ:NVDA) stock is sinking more than 9%. The shares of a number of other chip makers are also retreating, while Nvidia and some of its peers are trending on social media today.
Washington is requiring Nvidia to meet new criteria to obtain a license to sell its chips to Chinese customers, Nvidia reported yesterday via an SEC filing. The firm estimates the rule could reduce its annual revenue by $400 million. The new requirement also applies to Russia, but Nvidia reported that it does not have any customers in that country.
According to the filing, the U.S. is implementing the new rule to "address the risk that the covered products may be used in, or diverted to, a 'military end use.'" The measure will negatively impact sales of Nvidia's A100 and H100 offerings, which are used to facilitate the development of artificial intelligence.
AMD Will Also Be Hurt
Meanwhile, another prominent chip maker, Advanced Micro Devices (NASDAQ:AMD), received a similar notice from Washington, Investor's Business Daily reported today.
AMD's financial results could actually be affected significantly more than those of Nvidia by the new restrictions. That's because, according to one publication, in 2020, China, including Hong Kong, accounted for roughly 24% of AMD's total revenue.
In pre-market trading, AMD stock stock was retreating 2.2% and is now down more than 6% for the day.
Wall Street Firms React to the NVDA Stock News
Research firm Bernstein responded to the news by cutting its price target on NVDA stock to $180 from $210, while JPMorgan wrote Nvidia is "working to limit downside risk" of Washington's move, according to The Fly.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel's largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.
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