Nvidia (NVDA) shares took a significant hit last week when U.S. officials imposed stricter restrictions on the export of advanced AI chips to China. This decline had a ripple effect, causing a drop in various technology-centric exchange-traded funds (ETFs) heavily invested in the chipmaking giant.
One of the noteworthy casualties of this situation was the VanEck Semiconductor ETF (SMH), a $9.4 billion fund that had nearly 20% of its capital allocated to Nvidia. SMH saw a decline of more than 4% during the week, illustrating the extent of the impact.
Similarly, the iShares Semiconductor ETF (SOXX), an $8.7 billion fund with a 7.8% exposure to Nvidia, experienced a similar downturn in value.
The repercussions extended to broader tech-focused funds like the Invesco QQQ Trust (QQQ), which tracks the performance of the Nasdaq 100 Index. QQQ also faced a nearly 3% decrease in value. Nvidia holds the position of the fourth-largest holding in this ETF, accounting for just over 4% of its portfolio.
The Vanguard Information Technology ETF (VGT), which carries a substantial stake in Nvidia, also witnessed a drop of over 3% in its value.
Despite Nvidia’s recent poor performance in the market, it’s worth noting that the company’s stock price has nearly tripled in 2023, making it the S&P 500’s best-performing stock for the year.
Moreover, the situation surrounding Nvidia’s stock and the chip export restrictions sparked public opinion. Nvidia’s A800 and H800 chips, specifically designed for sale to China under AI chip restrictions announced the previous year, are now subject to these new rules.
According to a survey conducted by the AI Policy Institute (AIPI), the majority of respondents disapproved of Nvidia selling high-performance computer chips to China. A striking 71% of those surveyed expressed their disapproval, in contrast to the 18% who approved of such sales.
Furthermore, 63% of the respondents indicated their support for antitrust legislation or related measures against Nvidia to prevent the company from obtaining an excessive share of the semiconductor market. This growing sentiment could have significant implications for the chipmaker’s future endeavors.
In summary, Nvidia’s recent stock decline, precipitated by the tightened export restrictions on AI chips to China, has had far-reaching consequences, affecting various ETFs with substantial investments in the company. Public opinion seems to be leaning toward supporting export restrictions and potential antitrust actions against Nvidia, adding an additional layer of complexity to the situation.
