Nvidia (NASDAQ: NVDA) closed on December 10 at $138.81, down 2.55%, and is slipping further in pre-market trading on December 11, down 0.89% to $137.57, at the time of publication.
While Nvidia remains in the upper part of its 52-week range, it continues to lag behind the broader S&P 500, which is nearing record highs.
In the past month, NVDA has oscillated between $131.80 and $152.89, currently hovering around the midpoint of this range. Technical indicators point to resistance levels between $139.26 and $139.69, while support is found between $135.33 and $135.44.
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Analyst weighs in on China’s probe into NVDA
The recent dip comes amid growing concerns over China’s probe into Nvidia’s market practices, an investigation that analysts warn could spell longer-term challenges.
Ming-Chi Kuo, a respected market analyst at KGI Securities, highlights the key risk factors tied to this development. The focus of China’s investigation centers on Nvidia’s dominance in the AI chip sector—where it holds a staggering 90% market share—and its practice of bundling InfiniBand technology with its AI chips.
Drawing parallels to past cases, Kuo points out that antitrust probes in China can stretch over a year, citing Qualcomm’s RMB 6 billion fine and previous memory chip pricing investigations that took 15 to 19 months to resolve.
However, Kuo also notes that Nvidia’s short-to-medium term financial risk remains contained, as China contributes to only about 5% of the company’s data center revenue.
“China accounts for approximately 5% of Nvidia’s data center revenue; even in the worst-case scenario of a complete sales ban in the Chinese market, the short to medium term impact would be limited.”
He added:
“Market reaction to the investigation should be minimal; any stock volatility is likely to be temporary.”
Geopolitical risks for Nvidia
Geopolitically, the probe appears to be more than just a regulatory issue. Given the ongoing U.S.-China tech tensions, the investigation may serve as a bargaining chip, suggesting a drawn-out process rather than an immediate resolution.
For investors, Kuo advises caution, emphasizing that while the immediate stock price impact should be limited, this may be the first of several challenges Nvidia faces as it continues to dominate the AI chip market.
Despite these risks, Nvidia remains a powerhouse, but the geopolitical backdrop and potential regulatory scrutiny highlight the fragility of its global growth narrative. Ming-Chi Kuo notes investors should brace for potential volatility and keep an eye on how this investigation unfolds, as similar probes may arise, impacting the chipmaker’s future prospects.
Featured image via Shutterstock
