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Nvidia (Nasdaq: NVDA) stock opened lower on Tuesday despite a significant development that would allow the company to sell chips in China.

On Monday, President Donald Trump posted on Truth Social that it had lifted restrictions for Nvidia of selling its H200 chips in China, and other countries, under certain conditions to approved customers.

In exchange, Nvidia would have to pay 25% of its revenue from sales in China to the U.S. government. Trump wrote that the Department of Commerce if finalizing the details, and “the same approach will apply” to Intel, AMD, and others.

“Offering H200 to approved commercial customers, vetted by the Department of Commerce, strikes a thoughtful balance that is great for America,” a Nvidia spokesman told CNBC.

In his post, Trump wrote that Chinese President Xi responded “positively” to the news. Nvidia stock was up in pre-market trading on Tuesday, but then dropped at the open, down about 0.7% on Tuesday to $184.50.

What caused stock price to drop?

There may have been several factors related to Nvidia stock dropping on Tuesday, despite the fact that the news that was initially embraced positively by investors.

One part of it is China’s reaction. It is not entirely clear whether China won’t have its own restrictions on Nvidia or other U.S, chipmakers selling in China. The government had previously ordered Chinese companies not to buy Nvidia’s H20 chips promote Chinese chipmakers.

According to an article in the Financial Times Tuesday, China intends to limit access to Nvidia’s H200 chips, citing two people with knowledge of the matter.

The official response from China’s foreign Chinese foreign ministry spokesperson Guo Jiakun was inconclusive.

“China has consistently advocated that China and the US achieve mutual benefit and win-win results through co-operation,” the spokesperson said, reported the FT.

So, the uncertainty about how China will respond may be part of the reason Nvidia stock was down slightly. Also, some investors may be concerned about the higher 25% fee impacting Nvidia’s margins.

But analysts were generally positive on the deal. Vijay Rakesh with Mizuho Securities said it could provide a “modest tailwind” that could be impacted by how China responds, reported Investors Business Daily.

Overall, investors seem to be taking the news in stride, as trade negotiations and agreements between China and the U.S. have been volatile and uncertain. Many are likely taking a wait-and-see approach.

Nvidia stock is still trading at a high multiple, but its recent swoon has brought it down — and its forward P/E is fairly low at 29. Nvidia remains a consensus buy among most analysts with a median price target of $250 per share, which would be about 35% upside.

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