• NVIDIA's stock fell 1.2% following a report that China's internet regulator instructed its largest tech firms to stop buying the company's AI chips.
  • The directive intensifies the U.S.-China tech rivalry, forcing Chinese companies to cancel orders and seek alternative suppliers, accelerating a push for self-sufficiency.
  • The move deals a fresh blow to NVIDIA, which previously reported a $2.5 billion Q1 revenue loss and a $4.5 billion inventory write-off linked to earlier Chinese restrictions.

NVIDIA Corp. shares slid in early trading Thursday after a report indicated that China's top internet regulator has told the country's leading technology companies to stop purchasing the U.S. chipmaker's artificial intelligence processors. The directive, issued by the Cyberspace Administration of China, represents a significant escalation in the ongoing technological decoupling between Washington and Beijing.

According to people familiar with the matter, the instruction was delivered to firms including Alibaba Group Holding Ltd., ByteDance Ltd., and Tencent Holdings Ltd. These companies have been told to cancel pending orders and halt ongoing tests of NVIDIA's hardware, including its latest AI processor designed for the Chinese market, the RTX Pro 6000D. The order is a direct response to escalating U.S. export controls and reflects deepening national security concerns on both sides.

For NVIDIA, the news is another setback in a key international market. The company had already taken a financial hit from earlier restrictions, reporting a $2.5 billion revenue loss in its first fiscal quarter of 2025 and writing off $4.5 billion in unsellable inventory after a ban on its H20 chip. A spokesperson for NVIDIA declined to comment on the latest report. Attempts to reach the Cyberspace Administration of China for confirmation were not immediately successful.

The Chinese directive cites alleged security risks, including concerns about potential "backdoors" and remote shutdown capabilities in foreign chips—claims that NVIDIA CEO Jensen Huang has publicly denied. The move forces Chinese tech giants to pivot abruptly to alternative suppliers or accelerate the development of indigenous solutions, potentially delaying AI projects dependent on NVIDIA's industry-leading hardware.

While some analysts believe China's overall AI growth may be "largely unaffected" in the long term due to workarounds and domestic research, the immediate impact is a further fragmentation of the global AI supply chain. The development underscores the mounting risks for multinational technology companies caught in the crossfire of geopolitical friction, with hardware sales becoming a primary battleground in the U.S.-China rivalry.