New York, Jan 20, 2026, 17:17 EST — Shares of Nvidia fell sharply on Tuesday, closing down 4.3% at $178.07 in after-hours trading, following comments from Inventec, a major producer of AI servers that utilize Nvidia’s H200 processor. The company indicated that the approval process for selling the H200 in China “appears to be stuck on the China side,” raising concerns about the future of Nvidia’s AI hardware offerings in a critical market.
The H200, an AI accelerator chip designed for training and running large models, is essential for the expansion of the AI sector. Its significance extends beyond a single product line, affecting the broader ecosystem of servers, networking equipment, and supply chains that support large AI deployments. The lack of progress in customs approvals highlights the vulnerabilities in a market that has increasingly relied on Chinese demand.
Inventec President Jack Tsai emphasized that while the U.S. appears “open to it,” the ultimate decision lies with Beijing. “It appears to be stuck on the China side,” he remarked, illustrating the complexities of international trade and regulatory approvals in the tech industry. This development occurs amid an already tense atmosphere for AI hardware, with market valuations struggling to absorb disruptions in logistics or shifts in policy.
The news prompted a ripple effect across the AI chip sector. Broadcom saw a decline of 5.4%, AMD remained mostly flat, and Microsoft slipped 1.1%. Super Micro Computer, regarded as a bellwether for data-center demand, dipped 3.8%. Furthermore, the iShares Semiconductor ETF fell 1.5%, while the broader S&P 500 ETF experienced a decline of 2.1%. These movements reflect investor anxiety regarding the implications of ongoing trade issues.
In a related development, Morgan Stanley revised its outlook on North American IT hardware, attributing the change to tight budgets and rising component prices. Analysts highlighted a “perfect storm” of weakening demand, input cost inflation, and elevated valuations as contributing factors. This warning particularly impacts firms involved in servers and storage, segments crucial for the physical infrastructure of AI technology.
The bank’s latest survey indicates that hardware budgets are projected to increase by only 1% year-over-year in 2026, a stark contrast to the rapid growth rates previously seen in the sector. This muted growth forecast adds pressure on companies reliant on steady expansion, as investor expectations begin to shift amidst changing market conditions.
While there is a potential upside—should China expedite shipments—the risk of a protracted delay poses significant challenges. A continued holdup could compel customers to reconsider their deployment strategies or seek alternatives, particularly as investor scrutiny intensifies regarding 2026 demand forecasts.
The broader market felt the impact of these concerns, with Wall Street recording its sharpest daily decline in three months, driven by growing anxiety over tariffs and trade relations. Investors are now turning their attention to forthcoming U.S. economic reports, including updates on GDP, January PMI figures, and PCE inflation data, alongside any clear guidance on chip exports to China. These factors are poised to shape market sentiment as the industry navigates these turbulent waters.
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