Nvidia (NVDA) is retreating 3% after it was reported yesterday that a number of companies had developed methods of circumventing U.S. prohibitions on NVDA's chips being sold to Chinese companies.

Additionally, the imposition of President Donald Trump's tariffs today is pulling down most semiconductor stocks, including NVDA.

Circumvention of U.S. Prohibitions Discovered

Chinese entities have found methods of obtaining advanced NVDA chips that Washington has decreed must not be sold to the Asian country, The Wall Street Journal reported yesterday. Specifically, Chinese resellers have been obtaining NVDA's top AI chips from firms in nearby nations. Singapore said that it would investigate the matter.

The report may have led investors to fear that the loophole which Chinese entities have been using to obtain NVDA's chips will be closed, causing the company's top and bottom lines to drop significantly.

Trump's Tariffs Dent Most Chip Makers

The president imposed tariffs of 25% on Canadian and Mexican imports that became effective at midnight, and he also added a new 10% charge on Chinese imports. All three nations have announced that they will impose retaliatory duties.

The shares of most chip makers, including NVDA, are trading lower today following the news.

Trump's tariffs will likely raise the prices of products that use chips in the U.S., lowering demand for them. And retaliatory tariffs could reduce the demand for U.S. chips in other nations.

While we acknowledge the potential of NVDA, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.