What Happened?
Shares of leading designer of graphics chips Nvidia (NASDAQ: NVDA) fell 2.3% in the afternoon session after reports surfaced that China's internet regulator banned the country's largest tech companies from purchasing the American firm's artificial intelligence (AI) chips.
The directive from Beijing's Cyberspace Administration of China (CAC) specifically told major firms, including Alibaba and Bytedance, to stop using Nvidia's products. This ban reportedly included a chip model that Nvidia had specifically designed to comply with existing U.S. export rules for the Chinese market. This development heightened investor concerns about Nvidia's access to one of its key markets, adding to the regulatory pressures the company already faced in the region. The news sent ripples through the market, weighing on the broader technology sector and contributing to a drag on the tech-heavy Nasdaq index.
Separately, the Federal Reserve cut its benchmark interest rate by a quarter-point, while signaling one rate cut in 2026 which was lower than expectated.
The widely anticipated move put the new target range for the federal funds rate at 4% to 4.25%. Policymakers cited a weakening labor market and moderating economic growth as the primary reasons for the cut, signaling a shift in their approach to support the economy. However, they also noted that inflation "has moved up and remains somewhat elevated," creating a conflict as the committee balances its dual mandate of stable prices and full employment.Investors continued to look for clues on the pace of future rate cuts as the Fed tries to balance a slowing job market with ongoing inflation. Most Fed Committee members have indicated they expect two more cuts for the year.
The Fed's "dot plot" also suggests a much slower pace of cuts than the market currently anticipates. With only one cut implied for 2026 compared to the three that traders priced in, this explained the market pullback after the initial spike that followed the rate cut announcement.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
The shares closed the day at $170.21, down 2.7% from previous close.
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What Is The Market Telling Us
Nvidia’s shares are quite volatile and have had 18 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock gained 4.9% after the stock's positive momentum continued as the company unveiled its new Rubin CPX artificial intelligence (AI) chip, the successor to its latest 'Blackwell' technology.
The new processor is designed to handle complex functions like creating videos, generating software, and processing massive amounts of information, with the ability to handle context windows larger than one million tokens. Nvidia highlighted the potential for significant returns, stating that a $100 million investment in the new hardware could help customers generate $5 billion in revenue. This announcement reinforces the company's dominant position in the AI chip market, which has been a key driver in making it one of the world's most valuable companies.
The stock also benefited from a broader rally among AI chipmakers amid booming demand.
Separately, a strong outlook from software giant Oracle (ORCL) fueled optimism for companies exposed to artificial intelligence demand. Oracle's shares soared after the company boosted its outlook, citing booming AI demand. This positive sentiment rippled across the semiconductor industry, lifting shares of AI chipmakers like AMD, Nvidia, and Broadcom.
Nvidia is up 23.4% since the beginning of the year, and at $170.71 per share, it is trading close to its 52-week high of $183.16 from August 2025. Investors who bought $1,000 worth of Nvidia’s shares 5 years ago would now be looking at an investment worth $13,697.
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