Nvidia’s stock price increased in pre-market trading on Tuesday, by approximately 0.4% after the company took quick measures in order to reassure its investors about the situation in China. The trigger was due to a news article citing that Nvidia had asked its clients in China to pay in advance for the new H200 AI chips; however, Nvidia immediately denied that claim.
For a company that fluctuates due to the political headlines for months, even a tiny amount of justification was sufficient to boost the mood of the investors before the opening bell.
Nvidia’s Assurance for H200 Chip sales
Nvidia was blunt and direct in its reaction. A spokesperson for the company commented that it
“would never require customers to pay for products they do not receive”.
In other words, Nvidia isn’t only selling on pre-order to billion-dollar data centers. The explanation made a difference because the sale of H200 to China is still on hold due to regulatory uncertainty, and a whisper of strange payment conditions was interpreted as a sign that the situation was becoming chaotic rather than getting clear.
Retail Investors are Optimistic
The retail investors were one step ahead in giving the news a positive interpretation. Nvidia’s point of view was not regarded as a simple note, but a plot twist that indicates a happier ending might be approaching.
Some of the traders thought that the approval from China might not be that far away when it comes to the H200 sell-off, particularly after the Nvidia executives said during CES that the demand from China is still strong despite the unclear policies.
One retail trader who was quite positive in his comment stated that,
“Making H200 chips easier to grab = massive U.S. sales to China + global AI dominance. Let’s go!”
The U.S-China Tech War
China has been a constant troublemaker for Nvidia stockholders, who have had to bear the consequences of the long-standing tussle between the United States and China over the control and exportation of advanced technology.
It all started under the Biden administration, where President Biden imposed an absolute prohibition on the exportation of top-notch AI chips. However, the ban was lifted recently under the President Trump administration, but it came with its own terms and conditions.
President Trump not only permitted the sales of H200 chips to China, but also imposed a 25% tax on such sales, which was to be paid to the U.S government. This shows us how frequent the changes have been made, which ultimately affects the most experienced investors as well.
A Costly Pause
The uncertainty has been quite costly as well. As Nvidia previously took a $5.5 billion inventory write-down after the restrictions were extended to embrace the H200 chip, which is the most advanced processor that was previously allowed to sell in China.
Unless there is an official and long-lasting indication of approvals, China remains to be the major unresolved issue in Nvidia’s otherwise prevailing AI story. However, the stock is somehow down about 11% from its all-time high of $206.88, which it reached in early November. But this is the market’s way of showing that it is still aware of the risk.
Nvidia is Performing Elsewhere
While investors argue about geopolitical issues, Nvidia is performing as a company that has a lot going on. On Monday, it partnered up with Eli Lilly and announced the establishment of an AI lab for advanced drug development.
It also collaborated with Thermo Fisher and introduced new models under its BioNeMo program, which indicates that it is going further into AI-driven biology and drug discovery. Even when China news gets the most attention, Nvidia is quietly opening new areas for growth that are not affected by export restrictions.
Bottom Line
Nvidia’s premarket bumpy ride might not be significant, but in a market where the mood fluctuates with every regulatory rumor, resolving the confusion can be a strong catalyst. By confidently denying the rumor of an upfront payment, Nvidia has given reassurance to the investors that there is nothing strange going on behind the scenes.
China remains an unpredictable factor, but for now, the market appears to be pleased to consider it as a small victory and move towards the next headline.
