Nvidia Faces $5.5 Billion Loss as US Chips Export Rules Tighten Towards China

Nvidia, a leading player in the AI chip market, estimates a staggering $5.5 billion loss due to newly imposed US export regulations that restrict sales of its H20 AI chip to China.

Microchip titan Nvidia has announced it anticipates a significant setback, estimating $5.5 billion (£4.2 billion) in repercussions as the US government tightens export controls on its semiconductor products heading to China. Specifically, the H20 AI chip, a vital component in the company's expanding artificial intelligence portfolio, will now require special licenses for export to mainland China and Hong Kong, following recent advisories from federal authorities.

The latest restrictions come amid rising tensions in the ongoing trade war between the US and China, where both nations continue to levy hefty tariffs on a variety of exported goods. Following the announcement, Nvidia shares saw a nearly 6% dip in after-hours trading. According to Nvidia, the US government indicated that the licensing requirements are necessary to mitigate risks associated with the potential usage of these products in military-supercomputer applications in China.

Nvidia officials refrained from providing further comments when approached for clarification. Marc Einstein, an analyst from Counterpoint Research, commented that while the $5.5 billion figure is substantial, Nvidia has the capabilities to withstand these losses. He suggested that the move may serve as leverage in ongoing negotiations, speculating that exemptions or adjustments to tariff policies could arise soon since the fallout affects the broader US semiconductor landscape as well.

The chip industry has emerged as a focal point in the competitive landscape between Washington and Beijing, akin to the technological arms race for dominance. Nvidia, founded in 1993 and initially known for its graphics processing units (GPUs) aimed at enhancing gaming experiences, has turned its focus to augmenting machine learning capabilities which are now pivotal in AI technologies.

Earlier this year, Nvidia's valuation suffered a blow following revelations that a competing Chinese AI application, DeepSeek, was developed at a minimal cost compared to existing chatbots, igniting market concerns about the US's relative standing in AI advancements.

In light of this regulatory shift, Nvidia stated the projected $5.5 billion loss will derive from inventory adjustments, purchase commitments, and related reserves concerning the H20 products. Rui Ma, a tech industry analyst and founder of the Tech Buzz China podcast, predicts that if these restrictions endure, the sourcing of AI semiconductor supplies between the US and China could be entirely severed, further diminishing the viability of Chinese firms relying on US chip technology amid surplus data centers across China.