Nvidia ( NVDA ) stock fell more than 5% on Wednesday as a new report suggested Chinese environmental rules could impact the AI giant's sales in China. The decline came amid a broader sell-off in tech stocks on fears of an escalating trade war.

Nvidia shares sank after the Financial Times reported Chinese regulators are encouraging firms to use data center chips that meet strict environmental requirements. The guidelines exclude Nvidia's H20 chip, its processor compatible with US export controls for the Chinese market.

In response to the report, a Nvidia spokesperson said, "Our products provide superb energy efficiency and value in every market we serve. As technology moves rapidly, export control policy should be adjusted to allow U.S. firms to offer the most energy efficient products possible, while still achieving the Administration's national security goals."

The report comes amid escalating trade tensions between Washington and Beijing after the US imposed additional tariffs on Chinese goods since President Donald Trump took office. Export curbs on advanced semiconductor technologies have also been a sore point between the two countries.

Read more: The latest news and updates on Trump's tariffs

Also on Wednesday, TD Cowen analysts said Microsoft ( MSFT ) canceled new data center projects in the US and Europe, a move that heightened investor fears that Big Tech may pull back on artificial intelligence spending.

However, the analysts said, "Positively for third-party data center operators, our checks point to Google ( GOOG ) stepping into backfill capacity that Microsoft walked away from in international markets, while our checks point to Meta ( META ) backfilling capacity in the U.S."

The analysis follows a note from TD Cowen in February stating Microsoft recently canceled an unspecified number of data center leases.

Nvidia led the "Magnificent Seven" stocks lower on Wednesday, cutting short a recent rebound in the sector after the S&P 500 ( ^GSPC ) and Nasdaq ( ^IXIC ) entered correction territory earlier this month.

Tech stocks have led a broader market sell-off this year as investors weigh the impact of the Trump administration's tariff policy on the economy.

Read more: How does Nvidia make money?

Fears of an overvaluation in the AI trade sent Nvidia tumbling in late January after Chinese startup DeepSeek launched a chatbot, reportedly with fewer resources than its US rivals.

Renewed fears of an overextended AI trade surfaced earlier this month after chipmaker Marvell Technology's ( MRVL ) revenue outlook failed to impress investors, and semiconductor stocks fell.

Year to date, Nvidia is down roughly 15%.

@ines_ferre .