Nvidia shares surged more than 4% this week after the U.S. government approved AI chip exports to China, reversing previous restrictions. The move enables Nvidia to meet renewed demand from Chinese tech firms and reinforces its leading role in the AI-driven semiconductor sector.
The approval, focused on Nvidia’s H20 chips designed to comply with export rules, also lifted sentiment across the semiconductor industry. Peers like AMD and TSMC posted gains on speculation they, too, could benefit from eased U.S.-China trade limits.
In contrast, the broader market showed mixed results. The latest Consumer Price Index (CPI) data indicated inflation rising to 2.7% in June, up from 2.4% in May, fueling concerns about further Federal Reserve rate hikes.
Nvidia Leads as Export Approvals Boost Sentiment
U.S. Greenlights Nvidia’s H20 Chip Sales to China
Nvidia shares jumped over 4% after the U.S. government approved exports of the company’s H20 AI chips to China. The H20 chips are specifically tailored to comply with existing export restrictions, marking a reversal of previous bans. This development enables Nvidia to capitalize on pent-up demand from Chinese clients, creating new revenue opportunities in a region facing growing appetite for AI hardware.
Rally Spreads to Semiconductors
News of the approval quickly lifted sentiment across semiconductor stocks. AMD and TSMC both notched solid gains as traders speculated that relaxed restrictions could benefit other companies with exposure to China. With these moves, the AI-driven bull run in chip stocks regained steam, pushing related names higher and bolstering the overall technology sector.
Market Reaction: Inflation Clouds Broader Indices
CPI Data Fuels Uncertainty
While technology led by Nvidia and its peers outperformed, the rest of the market grappled with rising inflation. The latest Consumer Price Index (CPI) data revealed inflation increased to 2.7% in June, up from 2.4% in May. This uptick stoked fears about the Federal Reserve’s interest rate trajectory, creating uncertainty around broader market direction.
Mixed Index Performance and Sector Divergence
The Nasdaq ended the session up 0.2%, supported by persistent strength in leading AI names such as Broadcom and AMD. In contrast, the S&P 500 slipped 0.4%, with sectors like Materials, Health Care, and Financials dragging the broader market lower. Earnings reports added to the volatility, as tepid results stoked concerns about corporate profitability in a high-inflation environment.
Dow Slips as Banks Lag
The Dow Jones Industrial Average dropped by 0.7%, losing over 400 points as financial stocks underperformed. Banks including JPMorgan Chase and Wells Fargo posted mixed results, adding to the pressure and highlighting investor caution amid worries about the recovery’s resilience and cost pressures.
Conclusion
This week, Nvidia’s rally stood out as the tech sector’s AI momentum defied weakness in other areas of the market. Greenlit chip exports to China represented a significant catalyst, propelling both the company and the semiconductor industry higher. Meanwhile, inflation worries and lukewarm earnings weighed on major indices, causing sector rotation and a note of caution for traders watching broader economic signals. As AI continues to power tech gains, divergence between outperforming chip stocks and struggling sectors remains the market’s key dynamic.
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