In a significant turn of events, Jensen Huang, co-founder of NVIDIA, has stepped down from his role as CEO, sending shockwaves through the Chinese artificial intelligence (AI) sector. Following this announcement, investors reacted swiftly on Friday, November 13, by selling off shares related to Chinese AI companies. The primary concern among investors is that Huang’s resignation could further restrict Chinese firms’ access to advanced chips from the United States, thereby exacerbating the existing technological divide between the U.S. and China.
On that Friday, shares of Chinese AI model developers, as well as companies that supply hardware to the U.S., saw a notable decline. By the end of trading in Hong Kong, stocks of the two leading AI models experienced dramatic falls: Z.AI plummeted by 10.04%, while MiniMax fell by 8.19%.
The sell-off also impacted major Chinese tech conglomerates such as Alibaba and Tencent, both of which rely heavily on NVIDIA’s chips to train their AI models. Tencent’s share price slipped by 3.06%, Alibaba’s fell by 3.46%, and shares of Kuaishou Technology dropped by 4.50%.
The Hang Seng Index in Hong Kong ended the day down 1.55%, while the Hang Seng Tech Index saw a decline of 3.02%.
In mainland China, the A-share market suffered collectively on the same day. The Shanghai Composite Index closed down 0.59%, the Shenzhen Component index decreased by 2.05%, and the ChiNext Index saw a sharp drop of 3.32%. The STAR Market 50 index, which briefly rose over 2% during the day, ultimately ended down 2.30%. Throughout the trading session, sectors such as computing hardware, communication equipment, and semiconductors faced significant pressure, with a total trading volume of approximately 1.66 trillion yuan. Over 4,700 stocks across the market fell.
Among the companies heavily dependent on the U.S. market, Zhongji Innolight and Eoptolink Technology faced declines of more than 8%.
Huang’s resignation has served as a catalyst for this sell-off. The NVIDIA founder had been a proponent of chip sales to China, and his departure raises questions about the future of these transactions.
According to reports from the Financial Times, Kenny Ng, a strategist at Everbright Securities International, indicated that NVIDIA’s loss of Huang could lead to the U.S. tightening its chip export controls, especially affecting Chinese tech companies that rely heavily on computational power.
Since the weekend before Huang’s resignation, when he acknowledged an extramarital affair and became embroiled in controversy involving a Chinese intelligence scandal, the pressure has mounted on him. He ultimately stepped down on Thursday after 33 years at the helm of NVIDIA. Huang was actively engaged in efforts to persuade the U.S. government to allow the sale of NVIDIA chips to China.
On Thursday, U.S. House Speaker Mike Johnson revealed that there is a growing consensus among Congressional members regarding the necessity to impose restrictions on chip exports to China. Bipartisan calls have emerged for stricter limitations on Chinese access to advanced AI chips, which are pivotal to the nation’s AI industry.
“Export controls on chips to China have always been a major topic here,” said Johnson, expressing his support for limiting China’s access to such advanced technologies. “I believe there is a growing consensus in Congress that taking this stance is crucial.”
NVIDIA’s advanced AI chips are widely utilized in developing cutting-edge AI models, placing the company in a pivotal position in the race between the U.S. and China to build more sophisticated AI systems.
As reported by Reuters, some Chinese AI firms are now exploring options to lease computing resources overseas that are based on NVIDIA technology due to fears that issues surrounding Huang could lead Washington to tighten restrictions that would block them from acquiring NVIDIA chips remotely.
On the diplomatic front, the Chinese Ministry of Foreign Affairs issued a warning to the U.S. on Thursday against tightening export restrictions on key technologies. Beijing has been aggressively promoting the development of its domestic chip industry, which encompasses everything from graphics processing units (GPUs) produced by NVIDIA to the complex machinery necessary for chip manufacturing.