Nvidia has announced anticipation of a $5.5 billion impact due to new US restrictions on exporting its artificial intelligence chips to China, which consequently led to a decline in the company’s stock during after-hours trading. In a regulatory filing, the company stated that its H20 chip, designed to meet existing export control standards for sale in China, will now necessitate a special license for distribution to Chinese customers. This decision by the US aims to mitigate the risk of these chips being utilized in Chinese supercomputers.
Nvidia disclosed it would incur a $5.5 billion charge for the quarter ending April 27, attributed to the H20 chips. Following this announcement, Nvidia’s shares saw a 6% decrease after-hours, and futures for the tech-centric Nasdaq 100 index fell by over 1%.
This action by Washington represents the latest in a series of trade barriers aimed at exerting pressure on Beijing. The US has already increased tariffs on various Chinese imports, some reaching 145%, although certain consumer electronics have been temporarily exempted. White House Press Secretary, Karoline Leavitt, urged China to establish a new trade agreement with the US, remarking that the decision now rests with China.
Later that day, the US Commerce Department confirmed the introduction of new export licensing requirements for Nvidia’s H20 and AMD’s MI308 chips. A spokesperson from the Commerce Department stated its commitment to implementing the president’s directive to protect national and economic security. AMD, Nvidia’s primary competitor in the AI data center chip market, did not provide an immediate comment.
This restriction highlights Nvidia’s vulnerability to geopolitical tensions between the US and China, as it is a central player in the AI industry, having experienced rapid growth and briefly becoming the world’s most valuable company. Recently, the Trump administration initiated a national security investigation that could result in additional tariffs on semiconductors, while refraining from immediately imposing higher levies.
Despite Nvidia’s efforts to engage with the current administration, including CEO Jensen Huang’s interactions with President Trump, the company faces challenges. Nvidia has committed to investing up to half a trillion dollars in US AI infrastructure over the next four years, collaborating with firms like Taiwan’s TSMC and Foxconn. Plans for these investments were first reported by the Financial Times.
The company launched its H20 processors in response to the Biden administration’s previous export controls. Although these processors are less powerful than Nvidia’s premier graphics processing units, they have still attracted demand in China. Nonetheless, China has encouraged the use of domestic chips and may potentially exclude Nvidia products with new energy-efficiency regulations.
As of Tuesday’s close, Nvidia’s stock has dropped approximately 16% since the beginning of the year amid escalating concerns regarding the US-China technological conflict. Bernstein analysts reported that the H20 contributes around $12 billion of Nvidia’s $17 billion revenue from China. However, uncertainty remains regarding the possibility of obtaining necessary licenses or if this poses a complete cessation of the product line.
Efforts to release Nvidia’s latest AI chips have faced setbacks as consecutive US administrations have implemented measures to regulate technology exports. The US fears China might enhance its capabilities in building supercomputers for various military applications, including hypersonic weaponry and nuclear weapons simulation.
China has frequently criticized the US for using national security justifications, such as export controls, to impede its economic advancement. The Chinese embassy in Washington did not respond to requests for comment. A proposed “AI diffusion” rule, introduced towards the end of the Biden administration, is set to be enacted in May unless the Trump administration retracts it. The rule would stricter govern exports of advanced US chips through a tiered licensing system, restricting exports to a limited number of countries. Last week, Republican senators requested Commerce Secretary Howard Lutnick to rescind this rule, citing criticism from the industry, including Nvidia.
