Nvidia Faces $5.5bn Blow as US Tightens AI Chip Exports to China

Trump Administration Escalates Tech Trade War with New Export Restrictions

Nvidia is bracing for a $5.5 billion financial hit after the US government imposed new restrictions on the export of AI chips to China, further escalating trade tensions between Washington and Beijing.

The latest move, confirmed by the US Commerce Department, means Nvidia’s H20 chip — already designed to comply with earlier export rules — will now require a special licence to be sold in China. The announcement, made in a late-night regulatory filing, sent Nvidia’s shares down by 6% in pre-market trading on Wednesday.

AI Chip Sales in China at Risk

The H20 chip, introduced last year in response to previous Biden-era controls, was developed specifically for Chinese buyers. Analysts estimate that the chip accounts for around $12 billion of Nvidia’s $17 billion in annual revenue from China. However, under the new licensing rules, this revenue stream is now in jeopardy.

Nvidia has stated that the $5.5 billion charge reflects the value of unsold H20 chips, related inventory, and purchase commitments that may not be fulfilled under the new regulations. The US Commerce Department confirmed that similar rules will apply to AMD’s MI308 and any equivalent chips.

It is not yet clear whether the US will grant any export licences — or whether this could amount to a total ban on these chips.

Markets React to Heightened Restrictions

The announcement triggered a wider tech sell-off:

• ASML shares dropped 5% after disappointing machine order figures
• AMD also saw a 6% fall
• Chinese tech giants like Alibaba, Baidu and Tencent saw their Hong Kong-listed shares decline by up to 4%

The Nasdaq 100 futures also dipped by 1.4% as the market absorbed the implications of another blow in the ongoing US-China tech standoff.

US Pushes for New Trade Deal

White House press secretary Karoline Leavitt said the US remains open to negotiation and urged China to strike a new trade deal. “The ball is in China’s court,” she stated. The Commerce Department echoed this, noting the action was “to safeguard national and economic security”.

Earlier this month, President Trump imposed new tariffs on a wide range of Chinese imports — up to 145% on some items — though exemptions were made for certain electronics.

Nvidia Caught in Crossfire of Geopolitics

Nvidia, one of the world’s most influential chip designers, has become a central figure in the AI boom. The company briefly held the title of the world’s most valuable firm last year, thanks to skyrocketing demand for AI-related hardware.

But the US-China tech war has placed Nvidia in a difficult position. Its chips are manufactured in Taiwan and could be subject to tariffs when sold back into the US. To counter these geopolitical risks, Nvidia has announced plans to invest up to $500 billion in American AI infrastructure over the next four years in partnership with companies like TSMC and Foxconn.

China’s Domestic Push Threatens Future Sales

Despite strong demand, the H20 chip faces growing headwinds in China. Beijing is pushing tech firms to adopt locally made semiconductors from companies such as Huawei, and may enforce stricter energy efficiency rules that could disadvantage Nvidia’s products.

While the H20 was already a compromise — being less powerful than Nvidia’s top GPUs used by global tech giants like Meta, Microsoft, and Amazon — the latest restrictions could severely limit its viability both in China and globally.

Source: (FT.com)