Hikvision stock plummeted the daily limit of 10% during early morning trading in Shenzhen. It recovered some of those losses to close about 6% lower.
The move would be Washington's latest attempt to curb Beijing's tech ambitions, and a further escalation of the US-China trade war.
"Hikvision takes these issues very seriously and has engaged with the US government regarding all of this since last October," a company spokesperson said in a statement on Wednesday.
"Separately, Hikvision takes cybersecurity very seriously as a company and follows all applicable laws and regulations in the markets we operate," the spokesperson said.
The US Department of Commerce did not respond to a request for comment outside regular business hours.
Hikvision manufactures surveillance cameras and security products powered by artificial intelligence. The company says its products can track people using facial recognition or physical characteristics such as gait, count the number of people who visit specific areas, and detect "unusual behavior like a violent action."
Hikvision has faced international criticism for its surveillance deals in Tibet and Xinjiang, with US lawmakers last year urging sanctions against the company and helping China create a high-tech police state.
Brokerage firm Jefferies said in a note that a US ban would not hit Hikvision as hard as it did Huawei. The company can buy critical parts for its artificial intelligence products from local distributors, said Jefferies analyst Rex Wu.
In a note last month, said he expects Hikvision's annual revenue to be boosted by "China's central government procurement platform," noting that "Xinjiang's public security budget for 2019 is still rising" compared to a year earlier.