By Adam Clark

Nvidia was edging down early on Wednesday. A downbeat market mood and potential stricter regulations on its chips in China could be affecting the stock.

Nvidia shares were down 0.6% at $120.03 in premarket trading, while futures tied to the benchmark S&P 500 were falling 0.1%. The stock fell 0.6% on Tuesday.

The drift in the stock comes as more questions swirl around the return on investment for companies buying Nvidia's chips. Alibaba Chairman Joe Tsai said he was "astounded" by U.S. technology companies' spending on artificial-intelligence infrastructure on Tuesday at the HSBC Global Investment Summit in Hong Kong and questioned the need for spending hundreds of billions on AI data centers.

There are also potential concerns about Nvidia's Chinese business. Regulators in China have been discouraging the country's large technology companies from purchasing Nvidia's H20 chip -- specifically designed to satisfy U.S. sanctions on exports -- as it breaches energy-efficiency rules, the Financial Times reported, citing people with knowledge of the matter.

The rules haven't been strictly enforced and aren't yet affecting H20 sales but the company is seeking to arrange a meeting with Chinese regulators and is preparing to make adjustments to the chips which could make it less competitive, according to the FT.

Nvidia didn't immediately respond to a request for comment early on Wednesday.

Among other chip makers, Advanced Micro Devices was down 0.5% and Broadcom was rising 0.1% in premarket trading.

Write to Adam Clark at adam.clark@barrons.com

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March 26, 2025 05:50 ET (09:50 GMT)

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