It’s been a wild ride for chip stocks over the past few months. Indeed, while many companies, including Nvidia (NASDAQ:NVDA), are trading at or near all-time highs, other companies have seen their valuations take a hit due to several headwinds. Among the most prominent of these headwinds has been U.S. export restrictions to China, limiting the amount of high-performance artificial intelligence (AI) chips Nvidia and its peers can sell to U.S. companies.
That said, some intriguing news today around a potential new AI chip Nvidia could launch in the second quarter of this year has stoked enthusiasm around the group. Nvidia has surged to a record high today, with many of its peers seeing gains as well.
Let’s dive into what to make of this announcement and what it means for investors in these chip stocks.
Why Are Chip Stocks Up Today?
Nvidia announced today that it plans to mass produce a new chip aimed at the Chinese market. This new chip, the H20, would comply with existing U.S. export rules to the market. The H20 was announced in October, with production originally set for November. However, delays have pushed the chip back, with its launch now expected to come sometime in the second quarter of this year.
Initially, orders for the company’s biggest customers will be filled first, with production ramping up over time. Accordingly, it’s unclear what the exact impact this chip will have on earnings will be for the coming quarters.
Nvidia’s existing A800 and H800 AI chips were among the high-performance semiconductors the U.S. government banned for export to China. This alternative chip could help Nvidia maintain its market share in the Chinese market, which has taken a hit from these new regulations.
That said, certain Chinese customers have already shifted some of their semiconductor purchases to rivals, so it’s unclear if Nvidia’s market share will return to prior levels. While the company’s chips are among the best in the business, fears of additional regulatory crackdowns on the H20 and other potential new chips could be headwinds that arise in the future.
That said, for at least today, Nvidia investors have another potential catalyst on the horizon to focus on. This is certainly good news for those bullish on Nvidia’s long-term prospects.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
