Nvidia (NVDA) may lose out on up to $5 billion in orders to China after the U.S. imposed control restrictions on advanced AI chip exports, according to a report from the Wall Street Journal. This comes amid ongoing U.S.-China tensions and the tightening race between multinational chipmakers.

Yahoo Finance's Diane King Hall and Brad Smith deep dive into the implications of these ongoing tensions in the chip industry.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

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BRAD SMITH: Let's take a look at some individual movers in the chip space. First off, AI market leader Nvidia. The introduction of new US export controls may have a severe impact on the chip maker. According to "The Wall Street Journal," Nvidia may be at risk of losing out on orders worth $5 billion from China.

The report notes that Chinese tech giants, including Alibaba and Baidu, had placed orders worth billions for 2024, and Nvidia had planned to deliver some of them in the second half of November, which was the initial deadline to restrict shipments of advanced artificial intelligence chips to the world's second-largest economy here.

Now, we know much of this has continued to stem from the both US and China and the kind of tit for tat play out that we've seen with regard to intellectual property and how that's now impacted the semiconductor segment here. Most notably as the journal had reported on this, spokesperson for Nvidia saying the company has been working to allocate its advanced AI computing systems which use those graphics chips affected by the rules to customers in the US and elsewhere pursuing additional supply here.

DIANE KING HALL: One of the things that stood out to me in that report was also just that the pullout of the Biden administration and the tenuous relationship that the US has with China just part of those efforts to kind of crack down on the proliferation of our AI chip supply and AI in general, and what that could do in terms of China's powers with regard to AI tools, what China could do in terms of its utilization with AI within military capabilities and cyber warfare in general.

So that, of course, is the worry there. I mean, could it be another spy balloon kind of issue? You know, so you can certainly see how that's playing out in terms of like-- and we know that Nvidia is the leader in this space, so that is why, that's one of the reasons there's a microscope on this.

BRAD SMITH: Yeah, absolutely. I mean, for Nvidia, and I mean, I was contemplating being Jensen Huang for Halloween, given the success that he had seen and the stock he has seen for Nvidia over the course of this year. It's been one of the biggest stock stories of 2023.

But even thinking back to what Steve Sosnick was telling us from Interactive Brokers a moment ago here about where for the AI names that have really made up that magnificent seven, whether they be investors in generative AI, whether they be their own kind of research development, homegrown tools, applications, products for chips, in this case for Nvidia, or whether they be acquirers in an acquisition sense for artificial intelligence, that has been the larger theme that has really boosted not just these companies, but a lot of other companies that have been riding the coattails of it.

So this is the first instance here, especially as it's played out in now what is a years' long tit for tat trade war that has stemmed all the way from social media companies into energy purchases and commodities and now into some of the chips where a lot of the chip development and capacity, and this is particularly about fabrication as well.

In addition to that intellectual property, that fabrication process and reducing reliance on companies like TSMC for the world's kind of fabrication and the wafer processing as well, that's where you've seen the US invest more at the same time as cracking down on where that intellectual property could be shipped to other parts of the world and then harvested and tried to be replicated as well.

DIANE KING HALL: Yeah.