China’s internet regulator has instructed major tech firms to cease purchasing Nvidia’s AI chips and to cancel any existing orders. This move aims to enhance the Chinese semiconductor industry and lessen dependence on US technology.
Impact On Nvidia’s Stock
The restriction goes beyond prior advice from regulators, which concentrated on the H20 chips. Beijing is urging Chinese technology companies to reduce their reliance on Nvidia’s products.
Given this news from today, September 17, 2025, we expect immediate and significant downward pressure on Nvidia’s stock. Derivative traders are likely positioning for this by buying put options on NVDA, anticipating a sharp decline as the market digests the loss of the entire Chinese market. Implied volatility will almost certainly spike, making options more expensive but also presenting opportunities for volatility sellers later.
This ban is a material event, as China has consistently represented a significant portion of Nvidia’s revenue, even after the initial US export restrictions began back in late 2022. We’ve seen estimates from earlier in 2025 suggesting China still accounted for nearly 15% of data center revenue, a figure now heading to zero. This will force a major downward revision of future earnings guidance from the company.
Conversely, we are looking at bullish opportunities in China’s domestic semiconductor sector, particularly for companies central to their AI ambitions like Huawei and SMIC. Traders with access to the Hong Kong or Shanghai markets will likely be looking at call options or other bullish derivatives on these names. They are now being handed a massive, protected domestic market by their own government.
Impact On Chinese Tech Firms
For the major Chinese tech firms like Baidu, Alibaba, and Tencent, this is a headwind for their AI development. Their forced reliance on less advanced domestic chips could slow their progress relative to global peers. This may lead traders to take bearish positions on their US-listed ADRs, anticipating slower growth.
The entire semiconductor sector will see increased volatility from this escalation of the tech cold war. We are watching ETFs like the SOXX for signs of weakness, as this move signals deeper supply chain decoupling and heightened geopolitical risk for any company with exposure to China. Traders could use options on this ETF to hedge or speculate on broad sector movement.
This news also elevates overall market uncertainty, which could cause a spike in the VIX. We saw similar spikes during previous escalations in the US-China trade war in the late 2010s. Cautious traders may look to buy VIX calls as a portfolio hedge against broader market fallout from these tensions.
