Nvidia stock was slumping Tuesday following a report about harsher curbs on chip sales to China ahead of a make-or-break quarterly earnings report. Shares of the semiconductor maker has fallen 2.4% to $127.

Artificial intelligence-linked shares fell on Tuesday, in lead-up to AI bellwether Nvidia's quarterly earnings, which could offer clarity on demand and justify the sector's lofty valuations.

Nvidia has led the artificial intelligence boom to become one of the stock market’s biggest companies, as tech giants continue to spend heavily on the company’s chips and data centers needed to train

The broad goal is to prevent China from further developing a domestic semiconductor industry that could boost its AI and military capabilities.

The U.S. stock market faces uncertainty due to potential stricter trade controls on chip exports to China. Nvidia's impending earnings report adds tension amidst fluctuating semiconductor stocks. Concerns arise over consumer confidence and interest rate decisions as President Trump's policies continue to shape the economic landscape.

The Trump administration is planning to toughen semiconductor restrictions on China, continuing and expanding the Biden administration's efforts to limit Beijing's technological prowess, Bloomberg News reported on Monday.