Nvidia, a leading microchip maker, will face a $5.5bn (£4.2bn) loss after the US government imposed stricter export controls on its products to China. The company, central to the artificial intelligence (AI) boom, now requires licenses to export its popular H20 AI chip to China.
These new rules come amid escalating trade tensions between the US and China. Both nations have imposed heavy tariffs on a wide range of goods. Following the news, Nvidia’s shares dropped nearly 6% in after-hours trading.
On Tuesday, Nvidia announced that the US government informed it last week that the H20 chip needs a permit for export to China, including Hong Kong. Federal officials told Nvidia that this license requirement will last indefinitely. The company noted that the license aims to prevent the chip from being used in supercomputers in China.
Nvidia declined to comment further when contacted by the BBC.
Marc Einstein, an analyst at Counterpoint Research, stated that the $5.5bn loss estimate was in line with his expectations. However, he said Nvidia could bear the financial impact. He also suggested that the policy might serve as a negotiation tactic. He speculated that exemptions or policy changes could follow soon, as these restrictions affect the entire US semiconductor industry.
The US and China are locked in a fierce tech battle, with chips playing a crucial role. Nvidia’s AI chips are a focal point of US export controls. The company, founded in 1993, initially made graphics chips for gaming. Over time, it adapted its technology to support machine learning, becoming a key player in the AI field.
Nvidia’s stock value dropped in January when reports revealed a Chinese AI app, DeepSeek, was developed at a lower cost than competing chatbots. This caught the US off guard.
The $5.5bn charge Nvidia faces will cover inventory, purchase commitments, and related reserves for its H20 chips.
Rui Ma, founder of the Tech Buzz China podcast, predicted that the US and China’s AI semiconductor supply chains would decouple if these restrictions continue. She added that Chinese customers no longer need US chips, especially with China’s surplus of data centers.
