Nvidia stock declined 4% on Wednesday, even as strong earnings from ASML Holding lifted shares of other chip makers.
Shares of Nvidia made a strong 9% comeback Tuesday after a 17% drop on Monday. However, the stock was down 4.1% to $123.7 on Wednesday trading even after ASML, which makes equipment for the manufacturing of semiconductors, reported stellar earnings. The ASML news helped boost shares of peers including Analog Devices, which was up 0.2%, and Advanced Micro Devices, which gained 2.8%.
Nvidia's decline came as Bloomberg reported that the Trump administration was weighing additional limits on the sale of the company's chips to China. Officials are in early talks to expand restrictions to include Nvidia's H20 chips, the outlet said, citing people familiar with the matter.
In a statement to Barron's, an Nvidia spokesperson said the company was ready to work with the administration as it "pursues its own approach" to artificial intelligence.
"The thresholds set by the Biden administration are based on performance levels reached five years ago and achieved by leading gaming and workstation products," the spokesperson said.
Barron's has reached out to the White House for comment.
Nvidia -- and the chip sector as a whole -- got pummeled following a frenzy of interest in Chinese start-up DeepSeek's AI models, which appear to rival their leading Western counterparts while being developed at a fraction of the training cost.
Analysts have questioned DeepSeek's claim to have trained its model for a cost of $5.6 million. It's hard, if not impossible, to verify those numbers. What is certain is that tech investors panicked as DeepSeek's chatbot rose to the top of the Apple App Store's most downloaded applications over the weekend.
Investors were looking to Dutch chipmaking machinery company ASML for continued signs of strength in chips -- and they seem to have gotten it. The company posted strong earnings early Wednesday, and its strong bookings suggest that demand for the equipment used to make advanced chips such as Nvidia's remains strong. ASML's American depositary receipts were up 4.3% on Wednesday trading.
But it wasn't enough for Nvidia investors, who seemed to await further news.
"The concern for AI supply chains is whether the DeepSeek LLM approach causes a slowdown in hyperscaler AI capex [capital expenditure]. While we believe it is too early to assess the full impact, we do not expect the AI capex trend to change dramatically," wrote HSBC analyst Frank Lee, who kept a Buy rating on Nvidia stock with a $185 target price.
Other bullish investors will be hoping he's right.