Dow Jones Futures Fall As China Export Curbs On Nvidia, AMD Slam Chip Stocks

Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures, while Treasury yields popped. Nvidia (NVDA) and AMD stock fell overnight, dragging down semiconductors after they said that the U.S. government has imposed export restrictions on certain chip sales to China.


The stock market rally made a brief, feeble rebound attempt Wednesday, with the major indexes hitting resistance at the 50-day moving average before reversing lower.

On Thursday morning, China EV startups such as Nio will release August sales.

Nvidia Stock Falls On China Curbs

Nvidia stock tumbled nearly 7% in overnight trade. The chip giant said in an SEC filing that the U.S. government has imposed new license requirements that bar certain advanced data-center chip sales to China and Russia. Nvidia said the U.S. cites concerns about “military end use.” Nvidia, which does not currently sell products into Russia, said the restrictions could affect $400 million in sales to China.

The U.S. government is increasingly imposing curbs on high-end chip technology to China.

Nvidia rival Advanced Micro Devices (AMD) reported a similar U.S. notice over selling China various GPUs with AI uses. AMD stock fell 4% in late trade. Taiwan Semiconductor Manufacturing (TSM), which makes Nvidia chips, declined 2%.

The SMH ETF, of which all three chipmakers are a major part, slid 2% in late trading. Several other chip stocks fell modestly in the wake of the Nvidia and AMD news.

Pure Storage (PSTG) headlined earnings overnight. PSTG stock jumped on better-than-expected earnings as well as revenue guidance. Shares fell 1.8% to 28.97 on Wednesday, closing just above the 200-day line. PSTG stock may test a 31.62 buy point from a cup-with-handle base.

China EV Sales

Early Thursday, Chinese EV startups Nio (NIO), Li Auto (LI) and XPeng Motors (XPEV) will report August delivery data. EV and battery giant BYD (BYDDF) will likely report Friday or Saturday. Nio stock, along with shares of Li Auto, Xpeng, BYD and EV giant Tesla (TSLA) are struggling right now.

The new U.S. ban on certain Nvidia and AMD chip sales possibly could have an impact on Chinese EV makers, especially those with self-driving or driver-assist efforts.

With the market rally so weak, investors should be wary of new buys and acting to reduce exposure. But they should be looking for potential leaders for their watchlists.

Enphase Energy (ENPH), Pinduoduo (PDD) and NBIX stock are all consolidating nicely, with relative strength lines at 2022 highs.

Enphase Energy and PSTG stock are on the IBD 50 list. ENPH stock also is on the IBD Big Cap 20. Neurocrine Biosciences (NBIX) was Wednesday’s IBD Stock Of The Day.

Dow Jones Futures Today

Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures sank 0.5% and Nasdaq 100 futures declined 0.8%, with AMD and Nvidia stock weighing on the S&P 500 and Nasdaq futures.

The 10-year Treasury yield jumped 7 basis points to 3.2%.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Stock Market Rally

The stock market rally tried to rebound Wednesday morning, but the major indexes quickly backed off, closing at session lows.

The Dow Jones Industrial Average lost 0.9% in Wednesday’s stock market trading. The S&P 500 index declined 0.8%. The Nasdaq composite and small-cap Russell 2000 pulled back 0.6%.

U.S. crude oil futures fell 2.3% to $89.55 a barrel.

The 10-year Treasury yield rose 2 basis points to 3.13%.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) and VanEck Vectors Semiconductor ETF (SMH) fell 0.7%. TSM, Nvidia and AMD stock are major SMH holdings.

SPDR S&P Metals & Mining ETF (XME) declined 0.8%. The Energy Select SPDR ETF (XLE) gave up 0.9%. The Health Care Select Sector SPDR Fund (XLV) dropped 0.6%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) nudged down 0.1% while ARK Genomics ETF (ARKG) climbed 1.3%. Tesla stock is a major holding across Ark Invest’s ETFs. Cathie Wood’s Ark also owns some Nio and BYD stock.

Five Best Chinese Stocks To Watch Now

China EV Sales

Nio, Li Auto and XPeng report August deliveries before Thursday’s open. After all three China EV startups slightly topped 10,000 deliveries in July, Nio and XPeng may slightly miss that mark in August. Li Auto may not even hit 5,000.

Nio stock rose 0.6% to 19.95 on Wednesday, hovering below the 50-day line. Shares are working on a 24.53 bottoming base buy point that would involve getting above the 200-day line.

LI stock dipped 0.1% to 28.77 on Wednesday, again hitting 200-day line resistance.

XPeng stock rose 1.4% on Wednesday to 18.52, after hitting a 22-month low on Tuesday.

BYD Stock

Meanwhile, BYD will likely report August sales on Friday or Saturday. July sales of EVs and plug-in hybrids surged 222% vs. a year earlier to 162,350. There are indications that BYD will set another record in August.

On Monday, BYD reported first-half earnings tripled vs. a year earlier, with sales up 60%. That sent shares modestly higher.

But BYD stock plunged 7.8% on Tuesday, followed by a loss of 4.35% to 30.75 on Wednesday. Shares of the EV and battery giant have knifed below the 200-day line after hitting a record 43.61 on June 28.

Warren Buffett’s Berkshire Hathaway (BRKB) disclosed Tuesday that it sold 1.33 million H-shares on Aug. 24 in Hong Kong, less than 1% of its big BYD stock stake. Berkshire still owns slightly less than 8% of BYD, but investors worry that it’ll keep selling shares.

Tesla Stock

Tesla doesn’t break out China sales, but industry data suggest local sales topped 30,000 in August. That excludes exports to Europe and elsewhere. More complete industry data for Tesla will come later in September.

Tesla stock dipped 0.75% to 275.61 on Wednesday. Shares are holding above the 50-day, but falling from the 200-day and 21-day moving averages.

Tesla Vs. BYD: Which EV Giant Is The Better Buy?

Market Rally Analysis

The stock market rally isn’t showing much fight. The major indexes rose Wednesday morning, but quickly hit a wall at the 50-day moving average. They backed off, ultimately closing at session lows.

The Russell 2000 and S&P 400 MidCap retreated to just above their 50-day line, though they finished slightly under their 10-week averages.

Getting back above the 50-day line is important for the The Nasdaq, but it certainly wouldn’t be an all-clear signal for bulls. On the other hand, it wouldn’t take much of a decline to push the teetering market rally into a correction.

The U.S. ban on certain Nvidia and AMD chip sales seems likely to hit the semiconductor sector Thursday, with tech futures pointing to further weakness.

Time The Market With IBD’s ETF Market Strategy

What To Do Now

The market rally remains under pressure for now, but the weakness is obvious. Investors should be looking to take profits and cut losses instead of adding exposure.

Work on your watchlists. Continue to look for possible setups, but make sure to keep track of quality stocks with high relative strength, even if the charts aren’t ripe yet. But stocks can outperform in a weak market until they suddenly falter. And relative winners can still be absolute losers.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.


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