Nvidia shares slide as Beijing's rare earth export controls threaten chip supply chains

Graphics chipmaker faces new geopolitical headwinds

Nvidia shares declined nearly 5 per cent on Friday, closing the week 3.2 per cent lower, as investors reacted to escalating US-China trade tensions and Beijing's tightening grip on exports of critical materials essential to semiconductor manufacturing.

While the California-based chipmaker does not operate manufacturing facilities in mainland China, export licensing measures introduced by China's Ministry of Commerce and Customs on October 8 directly affect rare-earth elements integral to Nvidia's graphics processing units, including neodymium and dysprosium.

Additional restrictions on gallium, germanium, graphite, beryllium and antimony are already affecting cost structures and production schedules for Nvidia's manufacturing partners, notably Taiwan Semiconductor Manufacturing Company and Samsung Electronics. Assembly, packaging and testing processes that remain partially dependent on mainland China operations face similar pressures.

Supply chain resilience tested

TSMC has issued assurances that the new licensing regime does not disrupt its operations, citing diversified sourcing from Europe, Japan and South Korea. However, analysts caution that the full ramifications for Nvidia's supply chain will require time to materialise, particularly as the company faces potential revenue erosion in China, a market previously accounting for 20-25 per cent of total sales.

The prospect of direct export bans from Beijing could prolong supplier replacement timelines within the complex semiconductor ecosystem, adding further uncertainty to production forecasts.

Circular investment patterns emerge

Amid these supply chain concerns, Nvidia has moved to secure demand through strategic partnerships. The company is committing $100bn to OpenAI to expand artificial intelligence hardware markets, while OpenAI has separately agreed a $300bn arrangement with Oracle to construct US-based data centres — facilities expected to purchase substantial quantities of Nvidia chips.

These circular investment structures have drawn scrutiny from market observers. Sceptics warn of an inflating AI bubble, whilst proponents argue the deals establish durable infrastructure underpinning long-term growth in artificial intelligence computing.

Technical outlook remains constructive

Despite recent declines, Nvidia shares continue to trade $183 above key moving averages, preserving an upward trajectory established since April. The stock finds immediate support around $180, with technical indicators suggesting further floors at $166 and $144.

Market participants anticipate clarifying statements from Nvidia and its partners in coming days, similar to TSMC's recent reassurances. Should investor confidence stabilise, analysts project the shares could test resistance at $190 before attempting to breach $200, though prevailing geopolitical uncertainties may extend this timeline beyond the immediate term.