NVDA Stock Alert: Nvidia faces new sales restrictions in the Middle East

Despite all the good news that has been coming lately, NVIDIA (NASDAQ:NVDA) is facing a new challenge. Chip manufacturers need a special license to ship artificial intelligence on a large scale (AI) accelerator to customers in the Middle East. But US authorities have slowed the release of all of these documents while they conduct a “national security review of AI development in the region.” This news is pushing NVDA stock down today, and things are not looking good for its competitors, such as modern micro devices (NSYE:AMD), neither. This raises some questions about the future of the chip industry, especially as there are fears that the companies could lose some of their market share.

Does this mean investors should be cautious about NVDA stock as this matter unfolds? Let’s take a closer look at this news and assess what it likely means for Nvidia and its competitors.

What is happening with NVDA stock?

Investors have plenty of reasons to be optimistic about Nvidia stock right now. The company just announced its first-quarter results and beat Wall Street estimates on both revenue and earnings per share (EPS). It is also preparing for a 10-for-1 stock split that will take effect on June 10. The combination of these two positive catalysts sent NVDA stock soaring last week, but now it looks like it will end up in the red today unless shares recover quickly.

Currently, there are many questions about the Middle East license delay and very few answers. This is likely the reason for NVDA’s share price drop, as Wall Street hates uncertainty and exact details may not be announced anytime soon. Bloomberg Reports:

“It is unclear how long the review will take, nor is there a concrete definition of what constitutes a large shipment, said the people, who asked not to be identified because the talks are confidential. Officials are particularly focused on bulk sales, the people said, as countries such as the United Arab Emirates and Saudi Arabia look to import large quantities of the chips used in AI data centers.”

Nvidia is considered a pioneer of the AI ​​accelerator. These devices are a key component of the fast-growing data center market. But more than that, they are critical for any company looking to develop its own AI infrastructure—and that’s pretty much everyone in technology these days. Demand for its innovative products has helped Nvidia rise to the forefront of the AI ​​arms race.

But now the company’s global dominance could be in danger if the review drags on so long that buyers in the Middle East turn to other suppliers.

Why it is important

Admittedly, it takes a lot to pose a serious threat to a company as strong as Nvidia. The AI ​​market leader has had an excellent year, rising more than 130% in the last six months. Wall Street analysts love NVDA stock. Of 40 experts surveyed, 37 rate it as a buy and
I expect the price to continue to rise and the upcoming stock split will only help matters.

That doesn’t mean the licensing delays should be dismissed as insignificant, however. It’s hard to predict how much they could hurt Nvidia and its competitors, but much will depend on how quickly the review progresses and what it ultimately reveals.

At the time of publication, Samuel O’Brient had no position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s disclosure policies.