China’s internet regulator has told major tech companies to stop buying Nvidia’s AI chips and to cancel any current orders. This decision aims to boost China’s semiconductor industry and reduce reliance on US technology.

Impact On Nvidia’s Stock

This restriction is stronger than previous advice from regulators that focused mainly on the H20 chips. Beijing is urging Chinese tech companies to depend less on Nvidia’s products. With this news released today, September 17, 2025, we expect Nvidia’s stock to face immediate and significant downward pressure. Derivative traders are likely preparing for this by purchasing put options on NVDA, expecting a sharp drop as the market reacts to the loss of the entire Chinese market. Implied volatility will likely increase, making options more expensive and creating opportunities for those selling volatility later. This ban is critical because China has always accounted for a large part of Nvidia’s revenue, even after US export restrictions started back in late 2022. Earlier estimates from 2025 suggested that China made up nearly 15% of Nvidia’s data center revenue, a number that is now likely heading toward zero. This will require Nvidia to significantly lower its future earnings guidance. On the other hand, there are bullish prospects in China’s domestic semiconductor sector, especially for companies like Huawei and SMIC, which are crucial to China’s AI goals. Traders with access to Hong Kong or Shanghai markets will probably consider call options or other bullish derivatives on these companies. Their government is giving them a significant protected domestic market.

Impact On Chinese Tech Firms

For major Chinese tech firms such as Baidu, Alibaba, and Tencent, this scenario presents challenges for their AI development. Their forced use of less advanced domestic chips could slow their progress compared to global competitors. This may prompt traders to take bearish positions on their US-listed ADRs, anticipating slower growth. The entire semiconductor sector will experience more volatility due to this heightened tech cold war. We are monitoring ETFs like the SOXX for signs of weakness since this development indicates a deeper separation of supply chains and increased geopolitical risks for any company involved with China. Traders might use options on this ETF to hedge or speculate on broader sector movements. This news also increases overall market uncertainty, which could lead to a spike in the VIX. We observed similar spikes during past escalations in the US-China trade war in the late 2010s. Cautious traders might consider buying VIX calls as a way to protect their portfolios against potential market fallout from these tensions. Create your live VT Markets account and start trading now.

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