Nvidia (NVDA) stock sank roughly 2% in early trading Wednesday after Reuters reported that Chinese authorities have instructed customs agents to ban the entrance of the tech giant’s H200 AI chips into the country.
The drop in share price outpaced the tech-heavy Nasdaq Composite’s (^IXIC) 1% decline as stocks slid across the board.
The US formally approved H200 exports to China with some conditions on Tuesday.
Citing people briefed on the matter, Reuters also reported that Chinese government officials instructed domestic tech firms not to purchase H200 chips unless necessary. Nvidia did not immediately respond to a request for comment on the report.
The news followed a separate report from The Information Tuesday that Beijing would only allow imports of the AI chips under special circumstances like university research or development labs.
Simmering geopolitical tensions between the US and China have disrupted Nvidia’s sales to what was once in the not-so-distant past the chipmaker’s second-most important market. Revenue from China, including Hong Kong, fell 45% from the previous year to roughly $3 billion in Nvidia’s most recent quarter, according to Bloomberg data.
Initial disruption to Nvidia’s China business came from the US government as Trump restricted the company’s lowest-end AI chip sales to the country in April 2025. But after persistent lobbying and praise by CEO Jensen Huang, the president reversed his stance in return for a 15% cut of the company’s sales to the country. Trump’s request for a kickback from Nvidia’s China sales appeared to turn off officials in Beijing, who began clamping down on imports last summer.
Trump relaxed his posture further in the last two months, saying he would allow Nvidia to export higher-power H200 chips to China in exchange for a 25% cut of those sales.
Nvidia CFO Colette Kress stressed the importance of China — which Huang has said represents a $50 billion AI market — during a call with analysts at CES in Las Vegas on Jan. 5, but left questions about the market opportunity for H200 largely unanswered amid geopolitical uncertainties.
“[A]gain, it’s not all something that we can right now control…let’s just wait to see how we can get our H200 out,” she told analysts.
China’s reported restrictions unveiled Tuesday further complicate Nvidia’s path.
“Officials are prioritizing domestic chip development, even though Chinese processors still lag [the H200s] in training large scale AI models,” wrote Hedgeye Risk Management analysts in a note to clients Wednesday.