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Nvidia (NASDAQ:NVDA) shares fell 2% on Wednesday morning after a double blow of weaker AI demand signals and potential U.S. trade policy shifts rattled investor confidence.
The drop followed Super Micro Computer's (NASDAQ:SMCI) revised Q3 outlook, which flagged a slowdown in AI server demand. As a key Nvidia partner, the guidance cut from Super Micro weighed heavily on sentiment, sending its own stock plunging 15%.
Adding to market unease, a Reuters report said Trump administration officials are exploring tighter restrictions on AI chip exports. The proposal would replace President Biden's three-tiered licensing structure with a more centralized global approval process.
Under Biden's framework, set for May rollout, top-tier U.S. allies can purchase chips freely, while others like India and Israel need licenses. China and Iran remain barred entirely. Trump's approach could further limit overseas sales, particularly in key growth regions.
Major banks including Citi and Bernstein flagged the changes as a risk to Nvidia's international expansion, warning that firms like Huawei could capitalize.
Despite the drop, Nvidia remains a dominant force in AI. But new tariffs, possibly reaching 25%, and shifting geopolitics may cap upside in the near term.
Still, the company could find some insulation via USMCA trade provisions. CEO Jensen Huang has reportedly been engaging with policymakers across China, Japan and the U.S. to address global uncertainty.
This article first appeared on GuruFocus.