Nvidia stock was falling early on Wednesday. The chip maker still looks vulnerable to profit-taking and some concerns about restrictions on its exports.
Nvidia shares were down 1.3% at $121.04 in premarket trading. The stock closed down 1.3% on Tuesday.
Nvidia shares have risen 148% this year to date through to Tuesday's close. That compares with a 16% rise in the S&P 500 index and a 20% rise in the Nasdaq Composite Index over the same period. However, the stock has dropped from a recent intraday peak of more than $140.
"We view the current pushback on Nvidia to be centered around true end-market demand for AI GPUs [graphics-processing units], especially with further restrictions on shipments into China...as well as a slowing of the issuance of licenses to AI chip makers shipping to the Middle East," wrote Mizuho Securities analyst Vijay Rakesh in a research note.
However, Rakesh said Nvidia continues to be a top pick for July, keeping an Outperform rating and $127.50 price target on the stock.
The demand for Nvidia's chips continues to be strong in China, despite U.S. restrictions on the export of its high-end hardware.
More than 70 distributors in China are openly advertising online what they claim to be Nvidia's restricted chips, with supplies amounting to dozens of high-end processors each month and some offering entire servers worth more than $300,000, The Wall Street Journal reported.
The relatively small scale of the flow of chips into China -- estimated at around 12,500 annually according to an analysis by the Center for a New American Security -- should mean only limited concerns that Nvidia could be subject to tighter restrictions by the U.S. government.
Among other chip makers, Advanced Micro Devices was up 0.4% and Intel was rising 0.3% in premarket trading. Server maker Super Micro Computer was climbing 0.2%.
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