Just when it seemed that Nvidia (NVDA) was recovering after having momentarily fallen below $90, President Donald Trump announced a ban on the exports of the company’s H20 chips to China. The Jensen Huang-led company designed these chips for China after former President Joe Biden restricted exports of high-power artificial intelligence (AI) chips to the China, fearing their dual military use.

Nvidia said that it would book a charge of $5.5 billion in the current fiscal quarter related to the chips. Nvidia stock is trading sharply lower today and yet again risks falling below $100. “This disclosure is a clear sign that Nvidia now has massive restrictions and hurdles in selling to China,” said Wedbush Securities analyst Dan Ives.

The export control restriction, which comes amid the escalating trade war between the world’s two largest economies, is not particularly surprising. As I had noted previously, Nvidia risked getting caught in the crossfire in the U.S.-China trade war. 

Nvidia’s China Business Might Suffer After Export Control Restrictions 

Nvidia’s sales to China – its fourth-largest market after the U.S., Singapore, and Taiwan – would suffer as a result of the new export control restrictions. On multiple occasions, Nvidia has warned that it is losing its competitive edge in China and, during its fiscal Q4 2025 earnings call, said that its data center sales in the country as a percentage of its total Data Center revenues “remained well below levels seen on the onset of export controls.”

There are fears that Nvidia would lose market share to Huawei, a company it listed as a competitor in the last two annual filings. Notably, Huawei survived a near-death blow after U.S. sanctions were levied against it. Huawei made a “chip breakthrough” that helped it become the third-largest player in the Chinese smartphone market last year, mainly eating into Apple’s (AAPL) market share in the country.

Huawei might gain market share in China following the export ban on Nvidia’s H20 chips, which are the most powerful chips that the Santa Clara-based company has been allowed to export to the country. If Huawei can have a similar “breakthrough” in AI chips, it could challenge Nvidia’s dominance in the market, not only in China but also in other countries. Meanwhile, the new export control restrictions on China are the latest headwind for Nvidia and come at a time when the momentum in AI stocks has stalled at best.

AI Euphoria Has Subsided

To be sure, I am not in the camp that believes that AI is a bubble like the dot-com days. However, there were ample signs of it getting into a euphoria zone, especially as the markets started celebrating the mere mention of “AI” during earnings calls.

Tech companies are spending billions on AI, and not many have commensurate revenues or profits to back their investments. I can perhaps do no better than quote NYU Professor Ashwath Damodaran. Speaking with CNBC, the “dean of valuation” said, “the AI product and service business, which ultimately is what has to pay for all of this, has not taken off in any substantial way.” Damodaran added that he was “hard pressed” to find any company making “significant money” from the AI business. 

Pointing to reports of companies like Microsoft (MSFT) pulling back on AI spending, Damodaran said, it was perhaps a case of “too much money spent too far in advance” by tech companies. Alibaba’s (BABA) chairman, Joe Tsai, also echoed similar views and said that he sees an AI bubble in the U.S. "People are talking about $500 billion, several hundred billion dollars. I don’t think that’s entirely necessary. I think in a way, people are investing ahead of the demand that they’re seeing today,” said Tsai.

If there were any doubts that the AI euphoria wsa fading, the lackluster listing of CoreWeave (CRWV) should be proof enough. The Nvidia-backed company not only priced shares below its expected range, but the stock is now back near its IPO price of $40 amid the recent market fall.

Should You Buy the Dip in Nvidia Stock?

During the current earnings season, I will keenly watch the commentary from tech majors on their AI capex. While they might not scale back their aggressive spending, much of which lands in Nvidia’s coffers, I expect them to be somewhat circumspect. Surveys have shown that business leaders are worried about a recession amid the tariff chaos, and companies might not go overboard with AI capex as we saw in the previous few quarters.

While Nvidia was a Wall Street favorite just a few weeks back, sell-side analysts are also getting somewhat apprehensive about the stock. Earlier this month, HSBC downgraded the stock to a “Hold” from “Buy” as it sees “limited” pricing power in GPUs.

DA Davidson, Citi, and TD Cowen also slashed Nvidia’s target price in April. Overall, while I continue to hold some positions in Nvidia, I won’t rush to buy more shares at these prices as markets might still not be fully pricing in the current headwinds.