Nvidia Braces for $5.5B Impact as U.S. Tightens AI Chip Export Rules to China
Nvidia announced Tuesday that it expects a financial setback of $5.5 billion due to new U.S. restrictions on AI chip exports to China—a critical market for the company’s technology.
The tightened regulations, which now require export licenses for Nvidia’s H20 chips to China and Hong Kong, are part of the Biden administration’s broader effort to curb advanced technology sales to Beijing amid deepening geopolitical and trade tensions.
The chipmaker revealed that the expected loss is tied to inventory write-downs, purchase obligations, and related reserves connected to its H20 product line.
According to the U.S. Commerce Department, the latest licensing measures target high-performance AI chips, such as Nvidia’s H20 and AMD’s MI308, citing national security concerns over their potential use in Chinese supercomputing projects.
While the H20 isn’t Nvidia’s flagship chip, the company acknowledged its advanced memory and networking capabilities could support powerful computing systems. Nvidia also noted that the licensing requirement would remain in place “indefinitely.”
Following the announcement, Nvidia’s stock dipped nearly 6% in after-hours trading, while AMD saw a 7% decline.
The H20 chip is Nvidia’s top-tier offering for China, and demand had surged among tech giants like Tencent, Alibaba, and ByteDance to fuel the growth of homegrown AI models, including those developed by emerging firm DeepSeek.
A recent study by Washington-based think tank Institute for Progress suggested that some Chinese companies might have already deployed H20 chips in ways that could violate previous export restrictions.
Analysts say the financial blow is notable but unlikely to derail Nvidia’s long-term trajectory.
“Although significant, Nvidia is strong enough to weather the hit,” said Marc Einstein of Counterpoint Research. “This incident underscores the growing strain across the U.S. semiconductor industry.”
The update comes as Nvidia plans a massive investment of up to $500 billion in U.S.-based AI server infrastructure over the next four years, aligning with U.S. efforts to strengthen domestic chip production.
Industry experts caution that these escalating restrictions may fast-track the technological separation between the U.S. and China.
“Relying on American chips no longer seems viable for Chinese tech firms,” said Rui Ma, founder of Tech Buzz China. “Given the current surplus in data center capacity, alternatives will likely surface quickly.”
It remains uncertain whether the U.S. government will grant any export licenses for the restricted chips.
