Nasdaq 100 Futures Shed Over 2% as US Restricts Nvidia Chip Exports to China

Key moments

Nvidia Will Be Hit With Costs of $5.5B

US e-mini futures are indicating a significant downturn in market sentiment following a lackluster trading session on Tuesday that concluded with losses across the major US equity indices. This morning’s pre-market activity reveals a continuation of this cautious trend, with technology stocks bearing the brunt of investor concerns following the White House’s decision to hinder the sale of Nvidia H20 AI chips to China by introducing new licensing requirements.

Yesterday’s trading day saw the Dow Jones Industrial Average register a decline of 0.38%. Meanwhile, the broad-based S&P 500 Index also experienced a downward drift, closing 0.17% lower, as the lack of substantial progress in trade negotiations and the potential for further escalations continued to weigh on investor confidence. The tech-heavy Nasdaq Composite Index exhibited relative resilience, finishing with a marginal loss of just 0.05%. Notably, the Nasdaq 100 Index, which tracks the performance of the largest non-financial companies listed on the Nasdaq, managed to achieve a modest gain of 0.18%.

However, this muted investor sentiment turned decidedly bearish on Wednesday. Dow e-mini futures slipped by 0.79%, while S&P 500 e-mini futures saw a more substantial decline of 1.51%. The most significant losses, however, are concentrated in the technology sector, with Nasdaq 100 e-mini futures experiencing a notable drop of 2.13%, translating to a substantial loss of over 400 basis points.

The catalyst for this downturn was news that the United States government has limited the Chinese exports of Nvidia’s H20 artificial intelligence chips. Namely, Nvidia will need permits to ship these products to China due to concerns surrounding their potential usage in Chinese supercomputers. According to Nvidia, the new license requirements will translate to costs of $5.5 billion.

This development has had an immediate and significant impact on the market’s perception of Nvidia, a major player in the semiconductor industry and a notable component of the Nasdaq 100 Index. As China is a key market for the company’s advanced AI chips, Nvidia’s share price experienced a sharp decline, falling to $105 and even briefly dipping below this threshold in after-hours trading. This marks a notable contrast from yesterday’s price of just over $112.