Concerns over Nvidia's critical H200 processor have led to a significant drop in its share price, which fell by 4.3% to close at $178.07 in after-hours trading on Tuesday. The decline follows comments from Inventec, a key producer of AI servers, indicating that the approval process for the H200 in China is facing delays. This situation highlights the vulnerabilities of Nvidia's offerings in an essential market, raising alarm about the future of AI hardware.
Inventec President Jack Tsai noted that while the U.S. appears supportive of the product, the final decision rests with Chinese authorities, complicating international trade for tech companies. The stalled approvals threaten not only the H200 but also the broader ecosystem of AI-related technology, which includes servers and networking equipment.
In response to the news, the AI chip sector reacted negatively; Broadcom dropped 5.4%, Super Micro Computer decreased by 3.8%, and Microsoft saw a 1.1% decline. The iShares Semiconductor ETF and S&P 500 ETF also experienced drops of 1.5% and 2.1% respectively, reflecting investor concerns about ongoing trade issues.
Additionally, Morgan Stanley revised its outlook for North American IT hardware, citing budget constraints and rising component prices. The bank's survey forecasts a mere 1% year-over-year increase in hardware budgets for 2026, a stark contrast to earlier growth trends, which could pose challenges for companies dependent on steady expansion.