Nvidia (NVDA) shares dropped 2.8% to $229.12 at the opening bell on Friday, ending a seven-day winning streak that had pushed the stock to record highs. The decline came as investor optimism over a potential U.S.-China deal on Nvidia's H200 chip sales faded, with political headwinds rather than technical factors driving the sell-off.
Political Setback for H200 Sales
U.S. Trade Representative Jamieson Greer told reporters that chip export controls were not discussed during recent meetings in Beijing, according to Reuters. This dampened hopes that Nvidia CEO Jensen Huang's last-minute inclusion in President Donald Trump's China visit could revive the stalled deal. The H200, a high-end AI chip designed for data centers, had been a focal point of investor speculation.
Earlier this week, Reuters reported that the U.S. authorized around 10 Chinese firms, including Alibaba (BABA), Tencent, ByteDance, and JD.com (JD), to purchase the processors. However, no shipments have yet been made, leaving a significant gap for investors.
Market Context and Macro Pressures
The broader tech sector also faced headwinds. Advanced Micro Devices (AMD) and Intel (INTC) both dropped over 3% in premarket trading, as rising bond yields and renewed inflation concerns weighed on growth stocks. Global equities slipped, with Nasdaq futures turning lower and U.S. Treasury yields edging up, partly due to stronger oil prices.
Tim Graf, head of macro strategy for EMEA at State Street Markets, noted that the recent equity surge may be unsustainable. “If anything is enough to create a pullback, it is what’s happening in rate markets,” he said, highlighting the risk that inflation could persist above central-bank targets.
Nvidia’s China Exposure
Nvidia previously dominated roughly 95% of China’s advanced chip market before the U.S. tightened export restrictions. China once accounted for 13% of Nvidia’s revenue, but Beijing’s reluctance to purchase U.S. chips signals concerns about undermining its own push for homegrown technology. The company’s fiscal first-quarter 2027 results, set for release on May 20, are expected to exclude any data-center compute revenue from China, according to CFO Colette Kress.
Outlook and Risks
While Friday’s drop does not spell disaster for Nvidia’s core AI narrative, the stock faces headwinds from both political and macroeconomic factors. If earnings land strong, Beijing’s sign-off becomes clearer, or H200 deliveries kick into gear, the stock could rebound quickly. However, if China leans harder into Huawei and homegrown chips, and U.S. yields continue to climb, justifying the China premium becomes increasingly difficult.
Prediction markets reflect this uncertainty, with traders on Polymarket assigning a 67% probability to the Federal Reserve making no rate cuts in 2026, leaving little cushion for pricey tech stocks hoping for looser policy.
