Nvidia stock was falling early Friday as the market was digesting news on trade deals and the potential for a new artificial-intelligence chip for the Chinese market.

Shares, which are up 2.5% this week through Thursday's close, fell 1% lower to $116.12 in early trading.

Nvidia stock has risen 7.8% so far in May amid renewed optimism over trade and tariffs. Earlier this week the Trump administration said it would scrap regulations limiting global exports of advanced chips, drawn up by the Biden administration.

Now Nvidia is close to releasing a downgraded version of its H20 chip for China, Reuters reported Friday, citing people familiar with the matter.

The H20 chip is specifically designed for the Chinese market to comply with U.S. export restrictions. However, Nvidia last month said future sales of its H20 chips to China would require a license from the U.S. Department of Commerce, effectively blocking sales of those chips as licenses are unlikely to be forthcoming.

Nvidia declined to comment on the report.

Nvidia has already disclosed that its first-quarter results will include a $5.5 billion charge associated with inventory and purchase commitments related to the H20 chip for the Chinese market, following the imposition of licensing requirements. Analysts at Jefferies have suggested that will translate to around a $10 billion hit to revenue.

The worry is that a downgraded chip makes Nvidia more vulnerable to domestic competition from the likes of Huawei Technologies. Nvidia CEO Jensen Huang recently estimated the market in China for AI chips will be $50 billion in a few years.

Huawei has approached some Chinese tech companies about testing a new chip, called the Ascend 910D, which it hopes will be more powerful than Nvidia's H100, The Wall Street Journal reported last week, citing people familiar with the matter.

Nvidia's H100 was released in 2022 and has since been superseded by later generations of its Hopper chips and its new Blackwell AI semiconductors in the U.S. However, it is more capable than the H20 chip.