Nvidia faces $5.5b hit as US tightens chip export rules to China
Nvidia, a dominant force in the artificial intelligence chip market, has disclosed a projected $5.5 billion financial impact following new US export restrictions that require licensing for its high-performance AI chips sold to China.
The announcement sent shares down nearly 7% on Wednesday, contributing to a 3.1% drop on the Nasdaq.
The charges are tied to Nvidia’s H20 chip, a product specifically developed for the Chinese market after prior restrictions barred the sale of its most advanced GPUs.
The US government informed Nvidia last week that the H20 now also falls under the category of products requiring a special export license.
Federal officials cited national security risks, specifically concerns that such chips could be used in or diverted to Chinese supercomputers.
In a statement issued Tuesday, Nvidia said the licence requirement “will be in effect for the indefinite future,” and confirmed that the $5.5 billion in costs relate to inventory, purchase commitments, and associated reserves tied to the H20 line.
The move is the latest in a series of tightening controls as part of the US-China tech trade conflict, particularly around advanced semiconductors.
While Nvidia has previously navigated export restrictions by tailoring chip designs, this latest update significantly complicates access to one of its largest markets.
Marc Einstein, chief analyst at Counterpoint Research, said Nvidia’s estimated financial impact is in line with expectations but cautioned against interpreting the number in isolation.
“While this is certainly a lot of money, this is something Nvidia can bear,” he said.
He also noted the potential for policy revisions. “I wouldn’t be surprised to see some exemptions or changes made to tariff policy in the near future, given this not only impacts Nvidia but the entire US semiconductor ecosystem.”
The H20 was expected to be a key driver of near-term revenue growth in China.
These new licensing requirements will not only delay shipment timelines but may also alter Nvidia’s go-to-market strategy in Asia-Pacific, while intensifying scrutiny on inventory write-downs.
Semiconductors remain central to the evolving economic and geopolitical tensions between Washington and Beijing.
Export controls on AI chips have become a flashpoint, and US policy has increasingly focused on controlling access to hardware deemed critical for advanced computing and national defence.
For finance teams across the US semiconductor sector, the broader risks now extend beyond immediate revenue losses.
New export conditions could affect supply chain models, contractual obligations, and capital expenditure planning—particularly for firms with manufacturing or customer exposure in China.
Some analysts expect accelerated efforts by Chinese firms to develop domestic alternatives, which could further reduce long-term US supplier relevance in key segments.
Nvidia’s $5.5 billion hit, while significant, may not materially impact its long-term outlook, given the company’s strong performance in other global markets and ongoing demand for its AI hardware.
However, the episode serves as a high-profile reminder of the financial volatility associated with shifting trade and export control regimes.
Rui Ma, founder of Tech Buzz China, observed that prolonged restrictions could accelerate broader decoupling.
“It doesn’t make any sense for any Chinese customer to be dependent on US chips,” said Rui Ma, pointing to an oversupply of local data centres and parallel R&D activity across Asia.
With cross-border semiconductor trade facing new levels of uncertainty, the pressure is mounting on global firms to revise their China strategies—not only for compliance, but also for long-term business continuity.