Nvidia stock tumbles from record high on news of possible US chip export cap, ASML's dismal earnings

Nvidia (NVDA) stock sank more than 5% Tuesday, partially reversing its two week-rally and coming down from a record close the day before.

The stock's tumble began before the market opened in response to a Bloomberg report that Biden administration officials are considering capping US chip exports to certain countries. Bloomberg reports citing unnamed sources that potential regulations would focus on Persian Gulf countries in the interest of national security. The stocks of fellow chipmakers Advanced Micro Devices (AMD) and Intel (INTC) also fell on the news.

Intel declined to comment on the report. Nvidia and AMD did not immediately respond to requests from Yahoo Finance.

Adding to the woes of chip stocks Tuesday was a dismal earnings report from semiconductor equipment supplier ASML (ASML). The Dutch company — which sells equipment to chip manufacturers TSMC and Intel — reported booking orders worth just €2.6 billion ($2.8 billion), far lower than the €5.39 forecast by Wall Street analysts tracked by Bloomberg.

The PHLX semiconductor index (^SOX) fell 4.4% Tuesday, far underperforming the S&P 500 (^GSPC), which was down 0.5% midday.

Nvidia’s decline Tuesday partially reverses a two-week winning streak that saw the stock rally to a new record closing price Monday, nearly eclipsing Apple (AAPL) as Wall Street’s most valuable company. Shares closed above $138 Monday, ahead of its previous record of $135.58 in June. Nvidia's tear was fueled by news of intense demand for its AI chips and renewed bullishness over AI.

Nvidia stock has been more volatile since its 10-for-1 stock split in June, and news of heightened trade tensions focused on the AI chip sector — which Nvidia leads — have pushed shares down various times over the past two years. For example, Nvidia shares experienced a similar decline this time last year when the Biden administration tightened export controls on US chips — before extending its historic rally.

Despite Tuesday’s decline, Nvidia shares are up 186% from last year. While demand for its AI chips is strong in the near term, a potential slowdown in AI spending by big tech companies is another cause for concern to investors, in addition to geopolitical risks. DA Davidson's Gil Luria recently told Yahoo Finance that AI spending could ease as soon as 2025, which would be bad news for Nvidia shares.

Nvidia is set to report earnings on Nov. 19. Wall Street analysts expect the company to report revenues of $33 billion, up 82% from the prior year, according to Bloomberg consensus estimates. Some 90% of Wall Street analysts covering the stock tracked by Bloomberg recommend buying Nvidia shares.