NVIDIA Stock Drops 10% on Export Restrictions, Fed's Powell Comments

On the evening of April 17, U.S. stocks experienced an expanded decline, with NVIDIA's stock plummeting by more than 10%. This significant drop was triggered by a stern warning issued by NVIDIA, which highlighted the potential impact of export restrictions on its chips. The company disclosed that it would incur approximately $55 billion in expenses related to the H20 graphics processing unit, which is subject to export controls to certain regions and countries.

NVIDIA's filing indicated that the U.S. government had informed the company on April 9 that it would need to obtain export licenses for shipping its chips to specific nations and regions. This development underscores the potential slowdown in NVIDIA's overall growth due to increased export restrictions on its products. Other semiconductor stocks, including AMD, Micron Technology, and ASML, also followed NVIDIA's downward trend.

Large technology companies such as Meta Platforms, Alphabet (Google's parent company), and Tesla also faced pressure, contributing to the broader market decline. Federal Reserve Chairman Jerome Powell's remarks further exacerbated the downward pressure on U.S. stocks. Powell reiterated the central bank's focus on preventing tariff-driven price increases from evolving into more persistent inflation. He emphasized the Fed's commitment to maintaining stable long-term inflation expectations and ensuring that temporary price increases do not become sustained inflationary pressures.

Powell's comments reinforced the Fed's stance on not rushing to adjust the benchmark policy interest rate. He acknowledged the potential conflict between the Fed's dual mandate of promoting full employment and maintaining price stability, especially in the face of economic weakness and rising inflation. Powell stated that the Fed would consider the distance between the economic situation and its goals, as well as the potential time frames for closing these gaps, if such a conflict arises.

Powell also highlighted the significant and unexpected increase in tariff levels announced by the Trump administration, noting that these tariffs could lead to temporary inflation, with potentially more enduring effects. Investors are grappling with the escalating global trade tensions, as the U.S. has imposed substantial tariffs on multiple countries, with temporary exemptions for certain products. The ongoing trade negotiations and potential new tariffs on semiconductors, pharmaceuticals, and critical minerals add to the uncertainty.

The World Trade Organization (WTO) has warned that the uncertainty surrounding Trump's tariffs has significantly worsened the global trade outlook, particularly for North America. The WTO has downgraded its 2025 trade growth forecast, indicating a potential global economic slowdown. The organization cautioned that further tariff increases by the U.S. and their spillover effects could result in the most severe decline in global goods trade since the peak of the COVID-19 pandemic.

In response to the escalating trade tensions, investors are seeking clarity on the impact of Trump's economic policies, particularly on the trade front. The Fed's decision to maintain interest rates unchanged reflects its cautious approach, awaiting more definitive signals on the economic implications of these policies. Powell's remarks underscore the Fed's commitment to balancing its dual mandate while navigating the complexities of the current economic environment.