SPC Weekender: The Moneymaking Storylines Behind Nvidia's New Freedom to Export

This weekend’s edition of Stock Picker’s Corner (SPC) is all about Nvidia Corp. $NVDA ( ▼ 0.34% ) .

On July 15, the Trump Administration reversed a key ban that blocked artificial intelligence (AI) chip exports to China.

But the real story isn’t just about chip sales.

It’s about geopolitical forces reshaping global AI competition, creating new opportunities — and risks — for investors.

Before we dive in, here’s a quick message from this edition’s sponsor.

The AI Chip Ban Reversal Is Big — But the Bigger Opportunity Might Be Hidden 

The Trump Administration is ending an April ban that blocked Nvidia from selling its less-advanced H20 chip sales to China, which was a restriction that triggered a $4.5 billion first-quarter write down for the company.

Nvidia CEO Jensen Huang told President Donald Trump in a July 10 meeting that Nvidia should be allowed to sell its technology freely to most parts of the world so American companies can dominate AI instead of Chinese companies such as Huawei, according to The Wall Street Journal.

That’s because, paradoxically, the political imperatives intended to curb China’s AI ambitions may be fueling technological advancements in the country.

For example, Counterpoint Technology Market Research analyst Wei Sun told Bloomberg in June that the scarcity of Nvidia chips was forcing “workarounds,” leading to a real-world example of the adage: “Necessity is the mother of all invention.”

One of those workarounds (the more-with-less innovations) hit the tech world like a thunderclap back in January: DeepSeek.

Here’s a quick recap: DeepSeek built an AI model that outperformed OpenAI’s ChatGPT-4 in several benchmarks. It was also reportedly built in two months for $6 million without any advanced semiconductors. In comparison, Forbes estimated the cost of just training ChatGPT-4 was between $41 million and $78 million.

There was a lot of skepticism at the time, and deeper dives show that skepticism was warranted. Independent researcher SemiAnalysis believes DeepSeek may have spent $1.6 billion acquiring Nvidia’s most advanced chips.

Even so, no matter what the truth may be, the world of Big Tech was uprooted.

For instance, when Microsoft Corp. $MSFT ( ▼ 0.32% ) CEO Satya Nadella heard about DeepSeek’s rollout, he established a virtual “war room” and ordered his team to conduct an immediate security review. And at the time, Nvidia suffered its largest single-day loss ever on January 27, dropping 17% and eradicating $600 billion in market value.

So while the news of the week is that Nvidia can now ship its less-advanced chips to China, it’s the bigger picture that really matters for us Wealth Builders.

So let’s focus on that …

Key Insights & Actionable Takeaways

1️⃣This chip war is part of Chief Stock Picker Bill Patalon’s “Deglobalization” storyline — a shift away from global supply chains to refocus on rebuilding domestic production and infrastructure. It’s also the birth of a new concept called “Sovereign AI,” which we’ve talked about more extensively in our recent SPC Premium report on the “New Canada” with one company that is leading the way up north. Sovereign AI is more than just artificial intelligence innovation — it’s a concerted national strategy whose goal is to protect a country’s economic and technological independence. It allows countries to have full control over AI priorities, standards, and regulations. That benefits semiconductor manufacturers, chipmakers, data-center builders, cloud providers, cybersecurity firms, and defense contractors, just to name a few sectors.

2️⃣When we launched SPC last February, we said one of the most profitable storylines will be the AI Era. We chose “Era” purposefully because AI investing is more than just a trend. It will reshape how we live, learn, connect. So with that long-term view, the DeepSeek episode mentioned earlier is a perfect example of why you can’t overreact to any one piece of news. There will be breakthroughs we can’t even imagine and stumbles and setbacks no one has anticipated. But don’t let the daily news cycle knock you off your long-term investing plan.

3️⃣Finally, it may sound like too “simple” of an idea, but simple builds wealth — own some Nvidia shares if you’re comfortable with tech stocks. Even with shares climbing more than 1,500% over the last five years, Nvidia’s chips are embedded in the future of autonomous vehicles, cloud computing, robotics, and much more. That means it can still make its shareholders plenty of money. When the market was closed on September 2, 2024, we said to buy Nvidia shares on any pullbacks. On September 3, shares closed at $108. Today, they are $172.41 — a 60% gain in a little over 10 months.

That’s it for this issue.

Enjoy your weekend,