Nvidia stock fell Wednesday on news that its bespoke AI processor for the Chinese market fails to meet new rules there for energy efficiency.
China's top economic planner, the National Development and Reform Commission, has introduced energy-efficiency rules for advanced chips, Financial Times reported. Those rules would disqualify Nvidia's H20 chip from use by Chinese customers building or expanding data centers.
While the new rules haven't been fully enforced yet, regulators are discouraging tech giants like Alibaba, ByteDance and Tencent from ordering H20s, FT said.
Nvidia gets 13% of its revenue from China, or $17.1 billion in fiscal 2025 ended Jan. 26. The company's H20 chip is its flagship processor for the Chinese market. It is less capable than the company's top-of-the-line Blackwell processors in order to comply with U.S. trade restrictions on selling advanced technology to China.
Nvidia reportedly is seeking talks with China's NDRC and considering technical changes to meet the rules, FT said. However, those changes could weaken the chip's performance.
Nvidia risks losing sales to domestic rivals such as Huawei.
The news from China comes amid concerns that the Trump White House may keep all or most of the Biden administration's "AI Diffusion Rules." Those rules would further tighten restrictions on the export of semiconductors for artificial intelligence.
Meanwhile, the Trump administration has added dozens of Chinese companies to an export blacklist due to national security concerns, the Wall Street Journal reported Wednesday.
Among those added were subsidiaries of Inspur Group, China's largest server maker and a major customer for U.S. chipmakers such as Nvidia, Advanced Micro Devices and Intel. Companies linked to China's largest supercomputer maker, Sugon, also were added.
On the stock market today, Nvidia stock dropped 5.7% to close at 113.76.
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