Nvidia has announced an anticipated financial impact of $5.5 billion due to new U.S. restrictions on exporting artificial intelligence chips to China, leading to a drop in the company’s shares during after-hours trading. The company revealed in a regulatory document that its H20 chip, designed specifically for the Chinese market to meet existing export regulations that already restrict the sale of its most advanced chips in China, would now require a special license for sales to Chinese customers.
The U.S. government justified this requirement, expressing concerns over the potential use of H20 chips in Chinese supercomputers. As a result, Nvidia disclosed it would incur a $5.5 billion charge in the quarter ending April 27. This announcement caused Nvidia’s shares to fall by 6% in after-hours trading on Tuesday, while futures connected to the Nasdaq 100 index, which focuses on technology, fell by over 1%. Hong Kong’s stock market also saw a decline on Wednesday, especially among key AI chip purchasers like Alibaba, which dropped 5%, and Baidu and Tencent, both of which fell 3%.
The U.S. crackdown on H20 chips is part of broader efforts, including tariffs and other trade barriers, to exert pressure on Beijing. Former U.S. President Donald Trump increased tariffs on Chinese imports to 145%, although some consumer electronics have enjoyed temporary exemptions. White House Press Secretary Karoline Leavitt appealed to China for a new trade agreement, stating that the next move was up to them.
The U.S. Commerce Department confirmed the introduction of new export licensing requirements for Nvidia’s H20 chips as well as AMD’s MI308 and similar chips. A department spokesperson stated that these measures align with a presidential directive aimed at protecting national and economic security. AMD, considered Nvidia’s nearest competitor in the AI data center chip market, did not immediately comment on the matter.
The situation also highlights Nvidia’s vulnerability to geopolitical tensions between the U.S. and China, despite its leading role in the AI sector. The Trump administration recently initiated a national security investigation that could result in new tariffs on semiconductors, although immediate increased duties on chips are not being applied.
Despite restrictions, Nvidia CEO Jensen Huang had attempted to engage with former President Trump, including meetings at Mar-a-Lago and the White House. Furthermore, Nvidia announced plans to invest around half a trillion dollars in U.S. AI infrastructure over the next four years in collaboration with partners such as Taiwan’s TSMC and Foxconn. These plans had been exclusively reported by the Financial Times.
The H20 processors were introduced by Nvidia last year following Biden administration-imposed export controls. Although less powerful than Nvidia’s top-tier graphics processing units sought after by companies like Microsoft, OpenAI, Google, and Amazon, the H20 has continued to see demand in China. However, Beijing is promoting the use of domestically-produced chips from companies like Huawei and could potentially restrict Nvidia’s products further with new energy-efficiency regulations.
Since the beginning of the year, Nvidia’s shares have decreased by about 16% amid worries over the escalating tech race between the U.S. and China. The company’s performance has been affected by a broader market downturn triggered by increasing trade tensions. Analysts estimate the H20 chips contributed around $12 billion to Nvidia’s $17 billion revenue from China, yet uncertainty remains regarding whether export licenses will be granted, potentially leading to a significant decrease in the product’s market presence.
The rollout of Nvidia’s latest AI chips has faced obstacles as both the Trump and Biden administrations have sought to regulate the export of such technologies. Concerns persist that China could succeed in developing advanced supercomputers, which can be used for purposes ranging from hypersonic and nuclear weapons development to aiding the People’s Liberation Army.
China has criticized the U.S. for allegedly utilizing national security measures, like export controls, to impede its economic growth. The Chinese embassy in Washington did not provide comments regarding these developments.
A proposed “AI diffusion” rule introduced in the last moments of the Biden administration could come into effect in May unless the Trump administration chooses to reverse it. This rule seeks to impose strict limits on where the most advanced U.S. chips can be exported, applying a “tiered” licensing system that restricts exports to all but a select few countries. Last week, Republican senators petitioned Commerce Secretary Howard Lutnick to discard the rule, which has faced industry opposition, including from Nvidia.