Chips and Dip – Nvidia Takes a Hit 📉

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Chips and Dip – Nvidia Takes a Hit

After unsuccessful chances for resolution between the US and China, new priorities have been set to dominate the economic front. Alongside the rise in AI comes the power for hardware needed to operate this highly efficient technology. The United States understands this, and without any means to limit Chinese AI innovation, they are seeking to deplete their main source of tech infrastructure: chips. With some of the most ingenious chip makers operating domestically, the Biden administration is considering regulating the supply of chip exports to China. The announcement of such restrictions sent back the share prices of several chip makers, such as Nvidia. With roughly 20-25% of Nvidia’s data center revenue being attributed to China, the scare of that relationship sent their stock down almost 2%.

These measures of control over US exports were announced back in October, serving primarily to leverage the United States’ power over tech. The regulations are slated to begin as soon as next month, forcing China and other countries to obtain lucrative licenses before having export access to American-manufactured chips. Without access to the two largest advanced AI chipmakers, Nvidia and AMD, China’s capabilities to continue to innovate in the space would be hindered significantly. For the sake of top-line figures from these chipmakers, Nvidia has already begun developing chips solely for international markets, with decreased performance to abide by the Commerce Department’s thresholds. As the regulations are set into place, investors should monitor the earnings reports from the companies affected to see if the US is overstepping its boundaries on free market control.

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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

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