Shares of Nvidia (NVDA +2.46%), the leading maker of artificial intelligence (AI) chips, dropped 8.5% last week, which was a four-day trading week due to the stock market being closed for the Good Friday holiday. Nvidia stock ended the week priced at $101.49 per share.
For context, last week, the S&P 500 index declined by 1.5% while the tech-heavy Nasdaq Composite index fell 2.6%. For additional context, shares of Nvidia competitor Advanced Micro Devices (AMD) were down 6.3%.
Below is a discussion of the two major events that moved Nvidia stock last week.
Data by YCharts.
Tuesday, April 15: Nvidia stock gains 1.3% on U.S. investment news
Nvidia stock edged up 1.3% on Tuesday, a day that the S&P 500 slipped by about 0.2%. Investors liked the news the company announced in a Monday blog post, that it's "working with its manufacturing partners to design and build factories that, for the first time, will produce Nvidia AI supercomputers entirely in the U.S." Within four years, it plans to produce up to $500 billion of AI infrastructure in the U.S. through partnerships with several companies.
Specifically, Nvidia has started producing its new Blackwell chips at Taiwan Semiconductor Manufacturing Company's (TSM +1.15%) plants in Phoenix, Arizona. TSMC is the world's largest contract manufacturer of semiconductors. It's long been Nvidia's primary chip manufacturing partner. Moreover, Nvidia is also "partnering with Amkor and SPIL [Siliconware Precision Industries Co., Ltd.] for packaging and testing operations" in the state.
In addition, Nvidia is building two supercomputer manufacturing plants in Texas: one with Foxconn in Houston and a second with Wistron in Dallas. "Mass production at both plants is expected to ramp up in the next 12-15 months," according to the blog post.
Wednesday, April 16: Nvidia stock drops 6.9% on expanding export controls
Nvidia stock fell 6.9% on Wednesday, following the tech giant's Tuesday night disclosure via a filing with the U.S. Securities and Exchange Commission (SEC) that it plans to take charges of up to $5.5 billion on its fiscal first-quarter results. The charges stem from the U.S. government enacting restrictions on the export of its H20 chip to China and select other countries.
The H20-associated charges are for products in inventory, purchase commitments, and related reserves. In other words, Nvidia has purchase orders from Chinese companies for these chips that it doesn't believe it will be able to fulfill, and it has an inventory of these chips that it either won't be able to sell or would have to sell at significant discounts. (Demand for these chips would be low from Nvidia's major customers in the U.S. and other countries not subject to the new export controls. Such companies are buying Nvidia's most powerful Hopper and Blackwell chips.)
Nvidia stock continued to decline on Thursday.
NASDAQ: NVDA
Key Data Points
The second expansion round of the export restrictions that began in August 2022
This latest move by the U.S. government marks the second expansion round of the August 2022 export controls on chips and systems for data centers capable of handling advanced AI workloads. The first expansion occurred in October 2023. The restrictions are due to national and international security concerns.
The October 2023 expansion affected a substantial number of Nvidia's products within its data center platform, which accounts for the bulk of its revenue. (Data center revenue accounted for 90.6% of the company's total revenue in its most recently reported quarter.) Following this expansion, Nvidia specifically designed the H20 chip as a then-export control-compliant chip for the Chinese market, which has historically been a substantial market for the company. The H20 is a powerful chip, but not as powerful as Nvidia's most advanced chips.
In other words, the goalpost keeps moving for what chips Nvidia is restricted from exporting to China and other unfriendly countries.
As to specifics, Nvidia said in its filing that on April 9, the U.S. government informed it that a license would be required for the export of the H20 chip to China and select other countries. The government indicated that the license requirement stems from the risk that the H20 could be used in a supercomputer in China. Furthermore, the filing stated that Nvidia was notified on April 14 that the license requirement would remain in effect for the "indefinite future."
The license requirement essentially amounts to a ban. To my knowledge, there have been no published reports of the U.S. government issuing a license to Nvidia or other affected chipmakers that would permit them to supply chips included in the export controls to China or other affected countries.
Putting charges of up to $5.5 billion in perspective
The key question for investors is how much the new export controls will affect Nvidia's financial results. Nvidia's first quarter of fiscal year 2026 ends on April 27, 2025. The company has already announced its earnings release date, which is after the market closes on Wednesday, May 28.
For fiscal Q1, Nvidia had guided for revenue of $43 billion, which translates to 65% year-over-year growth and 9.4% sequential growth. So, $5.5 billion in H20-related charges amounts to 12.8% of the company's forecasted revenue. Nvidia just about always beats its guidance, so it's probably safe to assume it will generate revenue of, let's say, $43.5 billion to $44.5 billion before accounting for the charges. Assuming Nvidia would have taken in revenue of $44 billion, excluding the charges, its revenue would be about $38.5 billion with the charges included.
How does $38.5 billion in revenue stack up to the results for the prior quarter and the year-ago quarter? Last quarter (Q4 of fiscal 2025), Nvidia's revenue was $39.33 billion. So, it seems likely that Nvidia's fiscal Q1 revenue will probably be slightly lower than last quarter's, with the best-case scenario being revenue comparable to that of last quarter.
In the year-ago period (Q1 of fiscal 2025), Nvidia's revenue was $26.04 billion. So, if we assume the company's fiscal Q1 2026 revenue will be roughly $38.5 billion, year-over-year growth will be about 48%. While that's quite a bit lower than 65%-plus, it would still be darn good annual growth!
Of course, the $5.5 billion in charges will also hurt Nvidia's net income, or earnings. This effect is not quantifiable because the company doesn't break out any form of profit (such as operating income or net income) by its target market platforms (e.g., data centers, gaming, professional visualization, auto/robotics).
However, we know from prior management comments that the data center platform's profitability is greater than the company's overall profitability. So, it's probably safe to assume that the hit to the company's net income will be greater than the roughly 12% to 13% reduction in revenue.
Still a great long-term investment
I won't mince words: The H20 charges are going to significantly hurt Nvidia's fiscal Q1 results and will likely significantly hurt the company's results for at least a few more quarters. Without its H20 chip, Nvidia will have a very challenging time competing in the data center market in China. Therefore, investors can likely expect Chinese data center revenue to decline significantly.
That said, there are good reasons to remain very bullish on Nvidia stock as a long-term investment. The company's total addressable geographic market remains massive, even without China. Nvidia's graphics processing units (GPUs) are the market leader, by far, for AI chips for both training and inferencing (running AI applications), with demand extremely strong. Moreover, the next phases of AI -- agentic AI and physical AI (such as self-driving vehicles and robots) -- are in the early stages of rapid growth.
Investors should keep the big picture in mind: Granted, Nvidia stock is down 32% from its all-time closing high of $149.43, reached on Jan. 6 of this year, but it's still up 19.9% from a year ago. Meanwhile, the broader market, as proxied by the S&P 500, has returned 6.9% over the last year.
