Nvidia (NVDA) stock dropped 2% today as a war of words over security risks erupted between it and Chinese authorities.
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Security Proofs
The semiconductor giant was warned that it must produce “convincing security proofs” to eliminate Chinese users’ worries over security risks in its chips and “regain market trust.” That is according to a commentary published in China’s state-run media People’s Daily.
Foreign companies must comply with Chinese laws and take security to be a basic prerequisite; the commentary said.
It comes 24 hours after The Cyberspace Administration of China (CAC) summoned Nvidia to explain ‘backdoor security risks’ of its H20 chips sold in China and submit relevant documents.
The move is reportedly aimed at “safeguarding the network and data security of Chinese users” after comments from American AI experts suggested that Nvidia’s chips have location tracking and can remotely shut down the technology.
It is not clear who these experts are and if China has undertaken its own tests into the chips.
Nvidia came out fighting telling Reuters that: “Cybersecurity is critically important to us. NVIDIA does not have ‘backdoors’ in our chips that would give anyone a remote way to access or control them.”
It is understood that company representatives have already been interviewed by the CAC.
It comes at an important time for Nvidia and its relationship with China, which is a key part of its overall revenues.
China Crisis
Earlier this month, Nvidia said that it could resume its H20 AI chip sales in China, months after the U.S. Commerce Department put export restrictions on the chips amid ramped-up U.S.-China tariff trade tensions. Nvidia estimated that the ban had cost it a huge $15 billion in lost sales.
The chip was specially designed for Chinese customers to meet U.S. export rules and has been a top seller in the country since 2024.
Nvidia has also introduced a new AI chip for China. The model is designed for use in factory automation and logistics and is built on the company’s advanced Blackwell architecture.
If security fears are confirmed, then this could have a detrimental impact on the Nvidia share price which has performed well this year.
In 2023, the CAC said products from semiconductor group Micron Technology (MU), failed a national security review, resulting in a sales ban of its products to key infrastructure operators in China.
Is NVDA a Good Stock to Buy Now?
On TipRanks, NVDA has a Strong Buy consensus based on 34 Buy, 3 Hold and 1 Sell ratings. Its highest price target is $250. NVDA stock’s consensus price target is $185.79, implying a 4.45% upside.
