US trade war wipes $180 billion off Nvidia market cap within hours

Litecoin (LTC), Bitcoin Cash (BCH), and Dogecoin (DOGE) experienced significant rallies today, as nine proof-of-work cryptocurrencies surged following Nvidia's announcement of a $5.5 billion charge due to U.S. restrictions on its AI chip sales to China .

Nvidia (NVDA) is encountering substantial difficulties due to the U.S. government’s new restrictions on exporting its H20 AI chips to China, a key market for the chipmaker. This has resulted in a $5.5 billion charge for inventory, purchase commitments, and related reserves, causing the stock to drop as much as 7.5% and wiping out over $180 billion in market value.

The move by the U.S. to limit China’s access to advanced semiconductors, part of broader efforts to restrict the Asian nation’s technological development, is seen as a key development.

These restrictions, first reported by Bloomberg, are part of U.S. efforts to limit China's access to advanced semiconductors used in artificial intelligence and other technologies. The move comes amid heightened geopolitical tensions between the two superpowers.

The restrictions will affect Nvidia's H20 chips, also known as Grace Hopper, which combine CPU and GPU technology for AI applications. The sanctions will also affect AMD's next-generation CPUs, codenamed "Central Peak." Both chipmakers will be allowed to continue selling their existing products in China.

Nvidia did not immediately respond to a request for comment.

The steeper-than-expected price declines in Nvidia and other U.S. tech giants on Wednesday, following a report on new U.S. sanctions on AI chips, saw traders exiting those positions and seeking avenues to deploy capital.

With nine of the top ten roof-of-work coins reporting gains, it appears that traders are rotating capital toward the crypto market. Initial market movements show that nine of the top ten proof-of-work coins have benefited the most from the latest swing in market dynamics.

On the positive side, Nvidia had recently announced plans to invest up to $500 billion in the U.S. AI infrastructure over the next four years. This includes the production of supercomputers in Texas with partners like TSMC, Foxconn, and Wistron. It aligns with the Trump administration’s push for domestic manufacturing amid tariff concerns.

Nvidia is a key supplier of chips for cryptocurrency mining rigs, and its decision to boost local production in the U.S. has implications for the cryptocurrency sector.

As Nvidia pivots toward greater local production to align with U.S. government policies amid a broader trade war with China, traders are placing early bets on reduced supply chain disruptions for crypto mining equipment. This is also expected to keep energy costs lower and support broader macroeconomic recovery in the second half of 2024.

However, considering Nvidia’s systemic importance to crypto mining equipment, if the NVDA sell-off intensifies, market sentiment could abruptly flip bearish, putting overleveraged traders at risk.