Nvidia Faces $5.5 Billion Loss as U.S. Tightens AI Chip Export Restrictions to China
Nvidia is bracing for a $5.5 billion hit following new U.S. government restrictions that block the export of its H20 artificial intelligence chips to China – a major development in the ongoing tech trade tensions between the U.S. and China.
The chipmaker disclosed in a regulatory filing on Tuesday that the U.S. government now requires a special license for the export of its H20 chips to China. The surprise move, aimed at limiting Beijing’s access to high-performance AI technology, has rattled markets and added fresh strain to Nvidia’s business in one of its key international markets. Nvidia shares plunged nearly 7% on Wednesday in response.
The H20 chips, launched last year, were specifically designed to comply with previous U.S. export controls while still allowing Nvidia to sell to Chinese firms. The model is a toned-down version of Nvidia’s flagship H100 chip, which was already subject to a U.S. export ban.
Sudden Policy Shift Sparks Industry Concerns
Nvidia’s CEO and analysts alike criticized the abrupt change in policy, calling it disruptive and costly. “Nvidia specifically designed the H20 to comply with U.S. export restrictions… now the rules change and they lost $5 billion,” said Jay Hatfield, CEO of Infrastructure Capital Advisors. He described the evolving trade policy as unpredictable and damaging to U.S. tech firms.
In its filing, Nvidia said it will record the $5.5 billion as charges related to inventory and purchase commitments when it reports earnings on May 28. China accounted for approximately 13% of Nvidia’s sales last year.
The Rise of China’s AI Industry Adds Pressure
Part of the pressure behind the restrictions stems from the recent success of DeepSeek, a Chinese AI firm that used Nvidia’s H20 chips to develop a powerful language model, R1. The achievement, reportedly accomplished at a lower cost than U.S. equivalents, stunned the global tech industry and prompted lawmakers in Washington to call for tighter controls on U.S. chip exports to China.
Since then, China’s AI sector has experienced a surge in investment and innovation, intensifying the geopolitical battle over next-generation technology.
Deepening U.S.-China Tech Divide
The U.S. Commerce Department confirmed this week it has expanded export license requirements for certain high-performance chips, including Nvidia’s H20 and AMD’s MI308, in a bid to restrict China’s ability to leverage U.S. tech for military and strategic use.
A spokesperson for the department said the move aligns with the U.S. President’s directive to “safeguard national and economic security.”
Nvidia has been informed that the licensing requirement will be indefinite. The company did not elaborate on how the licensing process would work or if it expects to regain access to Chinese buyers under the new framework.
Industry Experts Predict More Trade Restrictions
Analysts at Morgan Stanley said the restriction on H20 chips, while anticipated, came more swiftly than expected. Dan Ives, head of technology research at Wedbush Securities, warned that more trade measures are likely.
“While the Nvidia news is concerning, it’s not a shock. We’re in the middle of a tech cold war between the U.S. and China, and more punches are coming,” he said.
Tariffs Take a Toll on Global Growth
The World Trade Organization weighed in on Wednesday, saying the broader trade war is already dragging down global economic growth. The WTO now expects global GDP to grow by just 2.2% this year, 0.6 percentage points lower than it would be without recent tariffs. North America is projected to see an even sharper slowdown.
Industry Pushback Mounts
U.S. tech companies have increasingly voiced concerns over the expanding export restrictions. Nvidia’s Vice President of Government Affairs, Ned Finkle, said in a recent blog post that while national security is important, overly broad limits on AI technology risk “derailing innovation and economic growth worldwide.”
He warned that restricting AI adoption in international markets could stifle opportunities for both U.S. companies and the broader global tech ecosystem.
As the U.S. prepares to enforce even broader export controls next month, including a global framework to prevent AI chips from reaching adversaries via third countries, Nvidia’s experience highlights the growing cost of the deepening technological divide between the U.S. and China.
