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Nvidia Shares Fall On New Ai Chip Export Rules. Is This A Golden Opportunity To Buy The Stock?
Nvidia (NASDAQ: NVDA) shares came under pressure recently after the Biden administration imposed tougher guidelines regarding the export of artificial intelligence (AI) chips. Under the new rules, most countries would be capped on the amount of advanced AI chips, such as Nvidia's graphic processing units (GPUs), they can purchase.
Based on this Interim Final Rule on Artificial Intelligence Diffusion, 18 countries face no restrictions and will not be required to get a license to buy GPUs, but 24 countries are banned outright. Most countries will need to get a license to import more than 1,700 GPUs. They could then purchase up to 50,000 GPUs, or up to 100,000 if certain requirements are met. Some nations, meanwhile, will be allowed to purchase up to 320,000 GPUs over a two-year period.
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Nvidia blasted the rule, saying it was done in secret under the guise of an "anti-China" measure, and the company argued it would only weaken U.S. global competitiveness, threaten innovation, and harm economic growth. At the same time, the company appealed to the incoming Trump administration, saying the first Trump administration helped lay the foundation that led to the strength the U.S. sees in AI today.
Impact on Nvidia
Right now, there is a 120-day commentary period before the rule goes into effect, and the incoming Trump administration could make changes. However, even some Republicans are in favor of tighter restrictions on advanced chips.
The 18 countries with no restrictions are some of the largest in the world, and Nvidia's sales into those European and Asian countries would not be impacted. However, there are data centers spread around the globe, and there are places in the Middle East that are emerging as AI data center hubs. Meanwhile, a company in India recently completed its first AI data center with 60,000 GPUs.
Limiting entire countries to 50,000 or even 100,000 GPUs would certainly hurt AI data center development in those regions. Large language models (LLMs) from Meta Platforms and Elon Musk's xAI are already being trained on more GPUs than these export limits, with Llama 4 using 160,000 GPUs. And there is talk of companies using GPU clusters made up of 1 million AI chips in the near future to train the next generation of AI models.
When looking at a breakdown of Nvidia's revenue so far in 2024, 45% came from the U.S. and 17% from Taiwan, which is not on the export control list. Nearly 13% of its revenue has come from China, where it was already prohibited from selling its most advanced chips. The rest comes from other countries, some of which the rule likely affects.
That said, much of Nvidia's business comes from large hyperscaler customers (companies that own huge data center complexes), and that is where much of its growth will come from in the future. These companies, including big cloud computing companies like Amazon, Microsoft, and Alphabet, will be able to seek approval to bypass the licenses for establishing AI data centers in impacted countries. Nvidia's top three customers accounted for about 34% of its revenue through the first nine months of fiscal 2025.
Image source: Getty Images.
Is it time to buy Nvidia stock?
Given the current demand for GPUs, a lot of the impact from a stricter export policy is likely to be absorbed elsewhere in the near term. The big hyperscalers were always going to be the biggest source of growth and demand for Nvidia's chips, and that is now more likely than ever.
Countries that need more than the allotted amount of chips could look to partner with the big cloud computing companies. Microsoft has already partnered with the United Arab Emirates, and in response to the announcement, Microsoft said it can continue to meet the technology needs of countries and customers around the globe.
As such, it sounds like many countries will be able to get the amount of chips they need as long as they have a U.S. tech gatekeeper. That will allow countries to move forward with their AI plans while making sure chips don't get directed toward places like China or Russia.
From a valuation perspective, the stock currently trades at a forward price-to-earnings (P/E) ratio of just below 30 based on analysts' fiscal 2026 estimates. Its price/earnings-to-growth ratio (PEG) is below 1, which typically indicates a stock is undervalued, although growth stocks often carry PEGs much higher.
Data by YCharts.
While the new export curbs add some additional potential risk for the company, Nvidia's valuation and overall opportunity remain attractive enough to make the stock a solid buy for investors.
Should you invest $1,000 in Nvidia right now?
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