Nvidia stock dips as China reportedly tells its companies to avoid buying chips

Nvidia (NVDA) shares fell nearly 3% Wednesday after a Financial Times report claimed China’s regulators banned Chinese tech firms from purchasing some of the AI giant’s chips.

The Cyberspace Administration of China has told companies, including ByteDance and Alibaba, to end their testing and orders of the RTX Pro 6000D, the Financial Times reported on Wednesday, citing people with knowledge of the matter.

The report comes ahead of a call scheduled between President Trump and China’s Xi Jinping to discuss trade this Friday. Semiconductor technology has been a focal point in trade tensions between the two countries.

Hedgeye Risk Management analyst Felix Wang wrote in a note following Wednesday’s news, “The decision underscores Beijing’s push to cut reliance on US semiconductors amid intensifying AI competition with the US and the promotion of domestic chip and tool utilization.”

Nvidia CEO Jensen Huang has repeatedly stressed the importance of the Chinese AI market, which he sees as a rapidly growing $50 billion opportunity.

Huang lobbied the Trump administration to lift a US ban on exports of its lower-power H20 chips to China this summer in an unprecedented deal that involved Nvidia sharing its revenue from those sales with the US government.

Analysts noted at the time that the deal — which has not yet been finalized — could lead Chinese firms to shift toward domestic chip suppliers because the Chinese government wouldn’t want companies effectively handing over money to the US government.

Huang said in August that Nvidia is working on a less-powerful version of its latest Blackwell chips for China.

When asked about China on Wednesday during a briefing in London, Huang told reporters, “I think that we could only be in service of a market if the country wants us to be.”

“I’m disappointed with what I see, but they have larger agendas to work out, you know, between China and the United States, and I’m understanding of that, and we’re patient about it,” he added.

Meanwhile, Chinese chip firms are working to fill the gap.

The Wall Street Journal reported in late August that Alibaba is testing a new chip for AI inferencing and that a slew of highlighted Chinese companies are developing substitutes for Nvidia’s H20 China chip.

Jefferies analyst Edison Lee has noted that Chinese AI cloud spending is accelerating. In a note in early September, the analyst said that capital expenditures from China’s three big cloud service providers — Tencent (0700.HK), Alibaba (BABA), and Baidu (BIDU) — as well as ByteDance, are “quickly catching up” with US counterparts.

Those stocks were on an upswing Wednesday amid investor confidence in those firms’ AI bets.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.

Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.

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