Nvidia's Stock Decline Impacts Semiconductor ETFs Significantly

The drop in Nvidia shares has weighed heavily on semiconductor ETFs with high exposure to the company.

Key Highlights

• Following new U.S. export limitations on advanced AI chips to China, Nvidia's stock fell sharply last week.
• This decline has negatively affected numerous ETFs heavily invested in Nvidia.
• Major technology funds such as the Invesco QQQ Trust (QQQ), tracking the Nasdaq 100, also experienced notable losses.
• A recent AI Policy Institute survey revealed strong public opposition to Nvidia's sales of high-performance chips to China and support for antitrust measures against the firm.

Nvidia (NVDA) shares dropped nearly 9% last week after U.S. officials implemented stricter controls on the export of cutting-edge AI chips to China. This downturn impacted various technology-focused exchange-traded funds (ETFs) with significant Nvidia holdings.

The VanEck Semiconductor ETF (SMH), managing $9.4 billion with close to 20% of assets in Nvidia, declined over 4%. Similarly, the iShares Semiconductor ETF (SOXX), holding 7.8% in Nvidia within its $8.7 billion portfolio, saw comparable losses.

The Invesco QQQ Trust (QQQ), a broad tech ETF mirroring the Nasdaq 100 Index, dropped almost 3%. Nvidia ranks as its fourth-largest holding, making up just above 4% of the fund. The Vanguard Information Technology ETF (VGT), with a similar Nvidia allocation, also fell by more than 3%.

Despite recent setbacks, Nvidia's stock price has nearly tripled in 2023, positioning it as the top-performing stock in the S&P 500 this year.

Public Sentiment Supports Export Controls and Antitrust Efforts

Nvidia's A800 and H800 chips, specially designed for sales to China under last year's AI chip restrictions, are now subject to the newly imposed regulations.

According to an AI Policy Institute (AIPI) survey, 71% of Americans disapprove of Nvidia selling high-performance computing chips to China, while only 18% support it.

Additionally, 63% of respondents favor antitrust legislation or related actions to prevent Nvidia from dominating the semiconductor market disproportionately.

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