Global semiconductor markets were rattled after reports emerged that China has urged its state-linked firms to limit purchases of U.S.-designed chips, including those from Nvidia. The move comes amid intensifying Washington-Beijing tensions over advanced technology, raising concerns about Nvidia’s future growth prospects in one of its largest overseas markets. Shares of the Santa Clara–based chipmaker slipped more than 2% in after-hours trading, reflecting investor unease.

Nvidia’s Market Exposure to China

Nvidia has long relied on China as a critical source of demand, particularly for its data center GPUs, which are widely used in artificial intelligence applications. Analysts estimate that China accounts for as much as 20% of the company’s revenue, though exact figures are difficult to verify due to the opaque nature of export classifications. The latest reports suggest Beijing is encouraging local enterprises to diversify away from U.S. suppliers, potentially redirecting billions of dollars in chip purchases toward domestic alternatives such as Huawei and other state-backed semiconductor developers.

Geopolitics Meets Market Valuations

The development highlights the vulnerability of Nvidia’s lofty valuation—currently trading at more than 30 times forward earnings—to shifts in geopolitical policy. Over the past year, U.S. regulators have tightened export controls on advanced chips to China, limiting Nvidia’s ability to sell its top-performing AI products. The company responded by designing modified chips that comply with U.S. restrictions, but Beijing’s reported directive could blunt the effectiveness of that workaround. For investors, the episode underscores how geopolitics—not just fundamentals—can drive tech-sector volatility.

Broader Implications for Global Markets

The chipmaker’s stumble also reverberates across broader equity markets, particularly technology-heavy indices such as the Nasdaq. Nvidia’s market capitalization, which surged past $2 trillion earlier this year, means that any decline can weigh significantly on benchmark performance. Beyond equities, the news adds pressure to global supply chains already strained by U.S.-China rivalry. For Israel, home to a growing semiconductor ecosystem and a critical hub for AI research, the situation offers both risk and opportunity: while local firms could face heightened competition, they may also benefit from global efforts to diversify supply away from China.

Looking ahead, the key question for markets is whether China’s reported directive represents a temporary bargaining tactic or the start of a structural shift in procurement policy. If the latter, Nvidia and its peers could face a lasting demand challenge from one of the world’s largest technology markets. Investors will be watching not only Nvidia’s next earnings release but also any signals from Washington or Beijing that could either escalate or ease tensions. For now, the company’s trajectory remains as much about geopolitics as about GPU performance.