NVIDIA stock slides amid AI chip export curbs, China revenue risks: strategic diversification in focus

Why Did NVIDIA Corporation Stock Fall on May 9, 2025?

Shares of NVIDIA Corporation (NASDAQ: NVDA) declined by 0.61% to close at $116.65 on May 9, 2025, marking a modest but telling downturn in the context of escalating U.S.-China tensions over artificial intelligence chip exports. The stock drop, equivalent to a 72-cent loss, reflects investor concern surrounding the deepening impact of Washington’s export control regime on one of NVIDIA’s largest foreign markets—mainland China. The intraday high was $118.18, while the low touched $115.40, highlighting the volatility that continues to define large-cap semiconductor stocks amid policy uncertainty.

This decline follows a broader pattern of caution that has emerged since the U.S. Department of Commerce broadened licensing rules to effectively block even reduced-performance AI chips, including NVIDIA’s custom-built H20 processor, from reaching Chinese customers. NVIDIA had designed the H20 in response to initial October 2023 restrictions, hoping to preserve access to a market that historically accounted for roughly 20% to 25% of its Data Center revenue.

What’s the Revenue Impact from the AI Chip Ban in China?

The blow to NVIDIA’s China operations has been severe and quantifiable. According to Jefferies, the company may lose up to $10 billion in annualized revenue due to the revised export regime. This forecast adds to the already visible impact on NVIDIA’s balance sheet—its Q1 FY2025 results included a $5.5 billion charge related to unsold H20 inventory and other chip write-downs.

Despite China’s strategic importance, the new policy framework bars NVIDIA from supplying even the “lite” versions of its AI GPUs without export licenses, which the Biden administration has so far withheld. Industry analysts have noted that this effectively neutralizes NVIDIA’s fallback strategy and places its Chinese business under long-term stress. Major Chinese tech firms including Alibaba Group, Tencent Holdings, and Baidu, Inc., long-time NVIDIA customers, are now pivoting toward domestic solutions such as Huawei Technologies Co.’s Ascend 910B/910D chips, which some engineers say are closing the performance gap with NVIDIA’s H100 architecture.

How Have Analysts and Institutional Investors Responded?

Institutional sentiment around NVIDIA remains fundamentally bullish in the long term, though some tactical repositioning is evident. Data from trading desks on May 9 indicated a rotation away from high-valuation AI names across the board. This sectoral softness was partially attributed to comments from U.S. Federal Reserve officials who signaled that interest rates may remain elevated through the third quarter, potentially tightening corporate tech budgets.

Nonetheless, Fidelity Investments, BlackRock, and Vanguard Group—among the largest holders of NVDA—have maintained or modestly increased their allocations during the recent pullbacks. Foreign institutional investors (FIIs) continued to exhibit conviction, with exposure to NVIDIA remaining a core strategy in AI-focused and innovation-driven exchange-traded funds (ETFs).

Sell-side analysts maintain that NVDA’s revenue trajectory in Western markets, particularly for its Blackwell B100 and B200 GPUs, will more than compensate for lost Chinese business. Several brokerages, including Morgan Stanley and Goldman Sachs, have reiterated “Overweight” or “Buy” ratings with 12-month price targets ranging from $130 to $150, contingent on successful volume ramp-up of the Blackwell line.

What Are the Key Financial Expectations for Q1 FY2026?

NVIDIA will release its Q1 FY2026 earnings on May 28, 2025, a report that will carry weight not only for its top- and bottom-line figures but also for forward-looking commentary. Market expectations place quarterly revenue between $24.5 billion and $25 billion, with earnings per share (EPS) projected between $5.30 and $5.50. Analysts anticipate gross margins near 77%, sustained by robust pricing for Blackwell chips and limited supply in the AI infrastructure market.

This report will be the first to fully account for the post-H20 export ban landscape and will likely offer a revised roadmap for NVIDIA’s engagement with Asian markets outside China, such as India, Vietnam, and Singapore, where government-backed AI data centers are under development.

How Is NVIDIA Shifting Strategy in Light of the Export Controls?

With China increasingly off-limits, NVIDIA is accelerating strategic diversification. CEO Jensen Huang has positioned the company to capture exponential demand growth across cloud hyperscalers and sovereign AI programs. In the United States, Blackwell-based GPU clusters have been deployed through Amazon Web Services, Microsoft Azure, and Google Cloud, targeting generative AI workloads, AI-as-a-service (AIaaS) platforms, and LLM model training.

In Europe, NVIDIA is working with governments on sovereign AI initiatives and quantum simulation frameworks. In India, it has announced new partnerships with Reliance and Tata to build foundational model training hubs and automotive edge AI capabilities. The pivot reflects NVIDIA’s intent to turn geopolitical risk into a catalyst for long-term regional expansion beyond its reliance on China.

What Competitive Threats Could Disrupt NVIDIA’s Dominance?

While NVIDIA remains the undisputed leader in high-end AI compute, competition is heating up. Advanced Micro Devices, Inc. (AMD) is gaining traction with its MI300X GPU, which offers a competitive price-performance balance and is increasingly being evaluated by second-tier hyperscalers. Intel Corporation is also ramping up efforts with its Gaudi2 and Falcon Shores products, aiming to claw back relevance in the AI accelerator market.

Beyond traditional competitors, internal chip design teams at cloud majors such as Google (TPUs), Amazon (Trainium, Inferentia), and Microsoft (Athena project) are increasingly producing custom silicon to reduce dependence on third-party vendors like NVIDIA. While these initiatives currently complement rather than replace NVIDIA’s products, they signal a long-term move toward vertical integration that could pressure margins and unit volumes by 2026–2027.

How Is the AI Hardware Industry Reacting to Geopolitical Constraints?

The semiconductor industry at large is undergoing a realignment, driven by the collision of technological ambition and national security priorities. U.S. export controls have forced AI chipmakers to reconsider supply chain logistics, design protocols, and go-to-market strategies. NVIDIA’s experience underscores how regulatory friction can have material consequences even for dominant firms.

AI hardware demand remains strong globally, but supply routes are fracturing into “tech spheres of influence.” As China accelerates its domestic chip production under its Made in China 2025 policy, and the U.S. tightens its grip on cutting-edge exports, players like NVIDIA must navigate increasingly complex trade corridors and client relationships.

What Lies Ahead for NVIDIA’s Stock and Strategic Positioning?

The stock’s short-term trajectory will hinge on upcoming earnings and regulatory signals from both Washington and Beijing. Should export licenses for lower-bandwidth AI chips be granted, NVIDIA could partially restore its China business. If denied, the company will likely double down on R&D to develop new form factors optimized for permitted geographies.

Looking further out, the combination of Blackwell product launches, Omniverse simulation environments, automotive AI expansions, and potential federal AI infrastructure funding in the U.S. presents upside for long-term investors. Risk-adjusted strategies may include rotating between AI infrastructure equities to capture cyclical troughs while holding NVIDIA as the secular leader in AI compute.