Nvidia Warns $5.5B Hit from China Restrictions

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Nvidia Warns $5.5B Hit from China Restrictions \ Newslooks \ Washington DC \ Mary Sidiqi \ Evening Edition \ Nvidia revealed a $5.5 billion quarterly charge due to new U.S. licensing requirements for exporting H20 AI chips to China and other nations. The announcement triggered a 6% after-hours stock decline and signaled growing export risks. Broader market impact followed, with shares of AMD and Broadcom also falling.

Quick Looks

Financial Impact: $5.5 billion charge linked to halted H20 chip exports.
Affected Markets: China and select other countries now require U.S. export licenses.
Stock Reaction: Nvidia shares dropped over 6% in after-hours trading.
Chip Details: H20 was designed to comply with earlier restrictions, generating $12–$15 billion in 2024 revenue.
Broader Fallout: AMD dropped over 7%, Broadcom down 4% after Nvidia’s filing.
Regulatory Shift: License restrictions now permanent for H20 exports.
U.S. Policy Context: Biden administration expanding AI chip controls via “AI diffusion” rules.
China’s Role: Still a critical market—Nvidia’s 4th largest by sales.
Competitive Pressure: Nvidia again lists Huawei as a key competitor.
Next Report: Nvidia to announce Q1 results on May 28.

Deep Look

Nvidia has warned it will take a $5.5 billion quarterly charge related to halted shipments of its H20 AI graphics processors to China and other countries, following new export restrictions by the U.S. government. The news sent Nvidia’s stock tumbling more than 6% in after-hours trading on Tuesday, while sparking broader concern across the semiconductor sector.

The announcement follows a notice from the U.S. Commerce Department on April 9, requiring the company to obtain a license to export its H20 chips. The license rule applies not only to China—Nvidia’s fourth-largest regional market—but also to a group of other nations flagged for national security reasons.

Market Reaction and Broader Chip Sector Impact

Nvidia’s updated filing marks the clearest signal yet that intensified U.S. export controls could stall its rapid ascent in AI hardware. The market reaction was swift: Advanced Micro Devices (AMD) slid over 7%, and Broadcom, another AI chip supplier, fell nearly 4% after Nvidia disclosed the financial impact.

The filing added that the U.S. government informed Nvidia on Monday that the license requirement for exporting H20 chips would remain in place “indefinitely.”

H20’s Role in Nvidia’s China Strategy

The H20 chip was specifically designed to comply with earlier U.S. rules targeting AI chip exports to China. Although slightly less powerful than Nvidia’s flagship H100 and H200 chips—due to reduced bandwidth and interconnection speeds—it was still used in major Chinese AI projects.

According to Nvidia estimates, the H20 generated $12 billion to $15 billion in revenue during 2024 alone, a substantial portion of total sales. Chinese firm DeepSeek, whose R1 AI model disrupted the market earlier this year, confirmed it used H20 chips in training.

Nvidia CEO Jensen Huang acknowledged in February that China-related revenue had dropped by half compared to pre-export control levels. He noted the company’s growing list of rivals in the region, highlighting Huawei as a formidable competitor for the second consecutive year in its annual filing.

China’s Role in Nvidia’s Global Sales

Despite falling sales, China remains a top-tier customer for Nvidia, behind only the U.S., Singapore, and Taiwan. In its last fiscal year ending in January, more than 50% of Nvidia’s total revenue came from U.S.-based clients, but China remains a vital hub for volume and strategic partnerships.

Nvidia has attempted to adapt. The company moved key operations like testing and distribution out of China following initial 2022 export restrictions. But it now faces a second wave of regulatory hurdles, with the Biden administration preparing to enforce new “AI diffusion rules” that could further limit chip exports starting next month.

White House Strategy: Balancing Security and Innovation

The Biden administration first restricted AI chip exports in 2022, tightening those rules in 2023 to include more advanced processors. The rationale, as cited by U.S. officials, is that chips like Nvidia’s can be used in developing supercomputers and AI systems with military applications.

Still, Nvidia has pushed back on expanding restrictions, arguing they could undermine U.S. competitiveness in AI innovation and cede technological leadership to rivals abroad.

CEO Huang recently told an audience at Nvidia’s annual developer conference that about half of the world’s AI researchers are Chinese nationals, many working at U.S.-based labs. He stressed the importance of complying with U.S. laws, but also hinted that global collaboration and access to cutting-edge hardware remain key to leadership in the AI space.

What’s Next for Nvidia?

The company is preparing to shift its focus to its latest AI chip architecture, called Blackwell, a successor to the Hopper-based H20. The hope is that newer, more powerful chips aimed at non-restricted markets will help offset potential declines in Chinese revenue.

However, tariff headwinds continue to complicate matters. President Trump’s recent announcement of broad trade tariffs has already pushed Nvidia’s shares down 16% in 2025, even before the latest export blow. While electronics like semiconductors have received temporary exemptions, new tariffs targeting the sector are reportedly in the works.

Key Takeaways:

Nvidia to take a $5.5 billion charge tied to H20 export restrictions to China.
Export licenses now required indefinitely, per U.S. government guidance.
AI chip sector slumps: AMD and Broadcom shares also fell.
H20 chip revenue reached up to $15 billion in 2024 alone.
Biden administration expands controls to prevent AI tech transfer to military regimes.
Nvidia warns of lost competitiveness, as China remains vital despite restrictions.
Next earnings report: Nvidia will announce Q1 results on May 28.