Nvidia faced a setback when China instructed its tech companies to stop using Nvidia’s H20 chips. This decision came after Commerce Secretary Howard Lutnick made controversial remarks about China’s use of American technology. Despite this news, investors remained optimistic about the AI stock. China’s move was in response to Lutnick’s comments about limiting Chinese access to Nvidia’s technology. The government asked Chinese companies to transition away from Nvidia’s H20 chips, but the stock saw a positive uptick in trading. The Nasdaq Composite index rose nearly 1.9%, and Federal Reserve Chair Jerome Powell hinted at interest rate cuts, which likely contributed to Nvidia’s stock rise of 1.7%.

China’s decision to “ban” Nvidia’s H20 chips stemmed from Lutnick’s comment that Chinese companies would only receive Nvidia’s “fourth best” chip. The Chinese government found this statement insulting and has been working to reduce reliance on American technology. Despite the ban, Nvidia’s investors are more interested in the company’s latest releases, like the Blackwell architecture GPU and the upcoming Vera Rubin chip. These products are key drivers of Nvidia’s revenue and profit growth.

The restrictions on Nvidia’s H20 chips in China are unlikely to significantly impact the company’s stock. While losing business in a major market is not positive, the H20 chip does not command premium pricing like Nvidia’s newer releases. The company has already factored in some lost sales from the H20 chip into its estimates. The focus remains on Nvidia’s latest technology, and investors should not alter their outlook on the stock due to these restrictions.

Read more at Nasdaq: China Warns Against Nvidia H20 Chips: Here’s Why That Won’t Stop the AI Leader