Semis slide ahead of NVDA earnings: China chip rejection fuels AI capex debate

Semiconductor stocks tumbled on May 15 as Beijing dealt a sharp rebuke to chip exports and Wall Street began questioning whether artificial intelligence capital expenditure has already peaked. Nvidia fell 2.2 percent, AMD 3.3 percent, and Broadcom 2.1 percent, as Samsung's selloff in Seoul (tied to North Korea tensions) spilled into US futures and pressured the entire sector. The immediate catalyst: China rejected Nvidia's H200 chips despite US government approval for sales to 10 Chinese firms, signaling instead a doubling-down on domestic semiconductor development and a potential loss of a key addressable market.

The broader narrative is structural. Investors have spent six weeks piling into AI and semiconductor names on the assumption that data center capex, driven by large language model training, inference, and retrieval-augmented generation infrastructure, will remain robust through 2027. But forward guidanceCompany-issued forecasts of future financial performance. from hyperscalers including Meta and Amazon has been cautious, and some analysts now question whether the pace of capex announced at recent conferences can hold. Goldman Sachs, JPMorgan, and Mizuho have all revised their semiconductor capex forecasts downward, citing margin pressure and a potential saturation in GPU supply.

Nvidia's earnings on May 21 have become a referendum on these assumptions. The stock has added roughly $1 trillion in market cap since May 5, raising the bar for management commentary. Investors are watching closely for forward revenue guidanceCompany-issued forecasts of future financial performance., gross margin assumptions, and any hint of customer pushback on pricing or delivery timelines. If guidance comes in below consensus, the sell-off could accelerate; if management projects sustained capex growth, the narrative resets higher. China risk is now a permanent variable: losing the mainland market (estimated 15-20 percent of Nvidia capex demand) would require material reforecast.

Emerging data suggests caution is warranted. Raymond James upgraded Arista Networks on the premise that AMD and Broadcom supply constraints in custom switching silicon could be a ceiling on hyperscaler deployments, forcing some names to slow capex. Meanwhile, Samsung's weakness in memory (MU down 5 percent) points to over-ordering in DRAM and HBM supply chains. Some traders believe the selloff is a healthy reset after weeks of parabolic gains; others view it as early capitulation before a final squeeze higher into earnings.