Nvidia Faces Major Loss After New US Export Restrictions on China

Nvidia's shares fell over 6% following an announcement of a $5.5 billion impact due to new US government export restrictions on their H20 AI chip to China, stirring concerns in the semiconductor industry.

Nvidia, a major player in the AI chip market, experienced a significant decline in its stock on Wednesday after revealing it would incur around $5.5 billion (£4.2 billion) in costs linked to recent tightening of US export rules towards China. The restrictions specifically target the H20 AI chip, which has gained popularity in the Chinese market. The US government's move is part of an ongoing trade conflict, with both nations imposing high tariffs on various goods.

In early trading, Nvidia's shares dropped by 6.2%, while the Nasdaq index fell by 2.3%. Nvidia reported that the US authorities informed them that a license is now required for selling the H20 chip to China, which includes Hong Kong, and noted that this requirement may persist indefinitely. The government justified this licensure by expressing concerns that the products could potentially be used in supercomputing applications in China.

When approached for further commentary, Nvidia refrained from additional statements. Marc Einstein, a consultant from Counterpoint Research, mentioned that while the estimated $5.5 billion loss is substantial, Nvidia has the capacity to withstand it. He indicated that this could be a strategy in ongoing negotiations, suggesting potential modifications or exemptions could arise from this policy.

Chips have become a focal point in the ongoing technology rivalry between the US and China, with both nations striving for advancement in the semiconductor sector. Established in 1993, Nvidia initially focused on graphics processing chips, particularly for gaming, before pivoting towards AI functionalities. The company's stock previously suffered a setback when it was revealed that the Chinese AI app, DeepSeek, could be produced at a much lower cost than other chatbots, catching US officials off guard.

Nvidia disclosed that the anticipated $5.5 billion charges would relate to its H20 product inventory, purchase obligations, and other associated reserves. Rui Ma, founder of Tech Buzz China, expressed concern that if restrictions remain, the AI semiconductor supply chains between the US and China could completely decouple, as Chinese clients may prefer to avoid reliance on US-made chips due to the surplus of data centers available in their nation.