Nvidia’s China Risk

Investors may need to rethink the valuation they’re putting on Nvidia. Shares of the artificial intelligence chipmaker fell 2.5% on Monday after Chinese regulators revealed they had opened an investigation into whether Nvidia broke anti-monopoly laws there. Details of the probe are described here. Suffice it to say this could well be one of China’s responses to the U.S. gradually tightening restrictions on sales of advanced chips to China (and here’s another).

If that’s the case, investors need to consider the possibility that Nvidia’s sales to China—which accounted for 15% of the company’s revenue in the most recent quarter—are at greater risk than they realize. The U.S. export rules have already stopped Nvidia selling its most advanced chips to China, although the impact on its topline has been muted by the AI chip explosion generally. This antitrust inquiry suggests Nvidia could face bigger problems there. It’s a good example of how increasingly tense relations between the U.S. and China are affecting companies that operate in both places.