TL;DR

  • The two-day Trump-Xi summit in Beijing concluded Friday without any major technology or trade deals.
  • Nvidia's H200 chip exports remain in limbo. The US cleared the sales, but China has not formally approved a single purchase.
  • Chip stocks sold off globally: Nvidia -2.5%+ premarket, AMD and Intel -3%+, SK Hynix -7.7%, ASML and Infineon -4.7%.
  • Nasdaq futures fell 1.4%, S&P 500 futures dropped 1%, and Dow futures slipped 0.6% as of Friday morning.
  • The 10-year Treasury yield hit 4.55%, the highest in a year. Fed rate-hike odds jumped to 45% from roughly 1% a month ago.

What Happened

President Trump concluded a two-day visit to Beijing on Friday after meetings with Chinese President Xi Jinping. Both sides described the talks as cordial and constructive. However, the summit produced no formal agreements on the trade and technology issues that markets were most focused on, particularly AI chip exports.

The most anticipated outcome was a breakthrough on Nvidia's H200 GPU exports to China. On May 14, Reuters reported that the US government had approved roughly 10 Chinese firms to purchase the H200, Nvidia's second-most powerful AI chip. That news triggered a broad chip stock rally and raised expectations heading into the summit.

Those expectations were not met. US Trade Representative Jamieson Greer said in a Bloomberg interview that Nvidia and semiconductors were not "front and center" in the talks. President Trump separately told reporters that the topic did not come up in his direct conversations with Xi. As of Friday morning, not a single H200 has been delivered to any of the approved Chinese buyers.

Nvidia CEO Jensen Huang, Apple CEO Tim Cook, and Tesla CEO Elon Musk were among a high-profile group of executives who traveled to China with Trump. The presence of that delegation had raised market expectations for tangible commercial outcomes. Danni Hewson of AJ Bell wrote in market commentary that investors had been "betting on the trip for tangible news that could lift Nvidia's sales even further."

China's stance on domestic chip production appears unchanged. Greer acknowledged that Beijing is "very committed to domestic production" and described the chip purchase decision as a "sovereign decision for China." Chinese firms are increasingly directing orders toward Huawei and other domestic chipmakers as part of a broader push to reduce dependence on Western technology.

Why Markets Moved: Chip Stocks Slide on No-Deal Outcome

The selloff in semiconductor names is a direct reversal of the pre-summit positioning. Investors had purchased chip stocks in anticipation of a deal that would open a large new revenue channel for Nvidia and its global suppliers. When that thesis did not materialize, the unwinding was sharp and broad.

According to MarketScreener, Nvidia shares fell more than 2.5% in premarket trade and extended losses after the opening bell. AMD and Intel both dropped more than 3%. The damage spread quickly across the global semiconductor supply chain. South Korean memory-chip maker SK Hynix, which supplies Nvidia with high-bandwidth memory, closed 7.7% lower in Asia. In Europe, STMicroelectronics shed 4.8%, Infineon fell 4.7%, and Dutch semiconductor equipment maker ASML lost 4.7%.

Two additional macro forces are compounding the pressure. First, the 10-year US Treasury yield surged nine basis points to 4.55%, the highest in a year, according to the Schwab Market Update. Rising yields compress the price multiples that growth and technology stocks trade at, increasing the sell pressure. Second, oil prices remain elevated at roughly $105 per barrel for Brent crude, sustained by fears of supply disruption around the Strait of Hormuz. Elevated oil feeds inflation expectations, and those inflation concerns are now pushing the probability of a Fed rate hike in 2026 to 45%, according to the CME FedWatch Tool. One month ago, that probability stood at around 1%.

Implications for Traders

Nasdaq and Equity Futures Traders

The index-level move reflects a sector-specific disappointment rather than a systemic macro shock. Semiconductors carry heavy weight in the Nasdaq 100, so the chip selloff pulls index futures lower even as other sectors hold relatively steady. The key question intraday is whether the Nasdaq stabilizes near pre-summit support or whether the yield spike triggers broader tech selling that deepens the decline.

Semiconductor and AI Sector

The China demand story, which had been building as a forward catalyst for Nvidia and its supply chain, is now delayed with no clear timeline for resolution. Beijing's commitment to Huawei-backed domestic chips means the window for Nvidia to capture that market may narrow further over time. The medium-term bull case for AI compute spending in the US and globally remains intact, but the China revenue uplift is no longer a near-term driver.

Bond and Rate Traders

The 10-year yield at 4.55% while equities are selling off is a notable dynamic. If oil stays elevated and inflation expectations remain sticky, the Fed faces renewed pressure to act. The jump in rate-hike odds to 45% for 2026 is a significant shift that deserves close monitoring as the week closes.

Potential Positives vs Negatives

Potential positives:

  • The summit ended on a cordial tone, leaving the diplomatic channel open for a future deal on chips or trade.
  • The US clearance for H200 sales to 10 Chinese firms is still technically in place. Beijing could approve purchases at any point without requiring a new diplomatic event.
  • Cerebras Systems had a strong IPO debut on Thursday, signaling that domestic AI investor appetite remains robust even amid the China uncertainty.
  • A pullback in richly valued chip names may create better entry points for longer-term holders if the China deal eventually closes.

Potential negatives:

  • China's accelerating investment in domestic chip production, led by Huawei, may permanently reduce the addressable market for Nvidia in China regardless of diplomatic progress.
  • Rising yields combined with persistent oil prices raise the probability of a Fed rate hike, which would apply additional pressure to high-multiple technology stocks.
  • Semiconductor earnings estimates may need to be revised lower if China revenue assumptions are trimmed from forward models.
  • If no deal materializes and the US responds with further export control tightening, the cycle of retaliation and domestic Chinese substitution could accelerate.

What Could Happen From Here

Base case: Chip stocks absorb the selloff and stabilize near pre-summit levels over the next one to two weeks. The broader AI investment thesis, anchored by strong US hyperscaler demand, remains intact and prevents a deeper correction. No immediate China deal, but neither side escalates. The 10-year yield stabilizes around 4.40-4.55% and oil pulls back modestly from $105. Confirmed by: Nvidia shares holding above their 50-day moving average; no new escalatory statements from either government; CME rate-hike odds staying below 50%.

Upside case: China formally approves H200 purchases within days, allowing deliveries to start before month-end. This would reverse most of Friday's selloff and push Nvidia back toward or above recent highs. Fed rate-hike odds would also fade if yields retreat. Confirmed by: An official Chinese government statement authorizing specific H200 purchases from approved buyers.

Downside case: China formally restricts purchases from Nvidia, or the US tightens export controls further in response to a perceived diplomatic failure. Combined with sustained high oil and a Fed tilting hawkish, this triggers a broader tech correction of 5-10% in the Nasdaq over the next week or two. Yields pushing toward 4.70-4.80% would amplify the pressure. Confirmed by: Official Chinese regulatory guidance restricting US chip purchases, or a Fed official explicitly endorsing a rate hike at an upcoming speaking engagement.

What to Watch Next (Next 24-48 Hours)

  • Nvidia (NVDA) open and intraday action: Whether the 2.5%+ premarket loss extends or reverses after the open is the near-term directional signal for the whole semiconductor sector.
  • Official Chinese government readout: Any formal statement on technology policy or trade posture following the conclusion of the summit.
  • 10-year Treasury yield: A move above 4.60% would be a fresh catalyst for continued selling in rate-sensitive growth stocks.
  • CME FedWatch rate-hike odds: Watch whether odds continue climbing toward 50%+ as the week closes. Any Fed official commentary today or over the weekend could accelerate the repricing.
  • Oil prices: Any diplomatic progress on Iran or the broader Middle East conflict that brings Brent below $103 would reduce the inflation premium in yields and ease one layer of pressure on equities.
  • Semiconductor supplier commentary: Watch for any public statements from ASML, SK Hynix, or other global suppliers on China order flows or guidance revisions.

FAQ

Why did chip stocks sell off if the US already cleared H200 exports?
The US government approved the exports from its side, but China's government has not formally authorized Chinese companies to complete those purchases. Without Beijing's approval, no deliveries can happen. The summit was expected to unlock that approval, and it did not.

What is the H200 and why does it matter?
The H200 is Nvidia's second-most powerful AI GPU (graphics processing unit), used to train and run large-scale AI models. Chinese technology companies were expected to be major buyers, which would have added a significant new revenue stream for Nvidia and the broader chip supply chain. The delay removes that near-term catalyst from earnings forecasts.

Sources

Also on the blog today: Clarity Act Clears Senate Panel as Bitcoin Reclaims $81K covers today's crypto market divergence from equities.

Build real skills, not bad habits. ChartDojo gives you AI-powered feedback on every trade you take, whether you are navigating chip stock volatility, index futures, or macro-driven market swings. Start your free trial at chartdojo.io/register.

Header image source: pexels by Pixabay. License: PEXELS.