Nvidia Corp is staring down a multi-billion-dollar blow as new US export controls tighten the noose around its operations in China. The company revealed that it will take a US$5.5 billion writedown in its fiscal first quarter, following the US government’s decision to require an export licence for its H20 chip — a product Nvidia specifically designed to comply with earlier restrictions.
The move signals a significant policy shift. In a regulatory filing on Tuesday, Nvidia said it was informed by US officials that the H20 will now fall under indefinite export licensing requirements, with authorities citing concerns that the chips may be used in or diverted to Chinese supercomputers.
The market reacted swiftly. Nvidia’s shares dropped approximately 6% in after-hours trading, while shares of rival Advanced Micro Devices Inc — also exposed to the AI chip space — fell as well.
The H20 chip had been Nvidia’s tailored solution for the Chinese market, balancing capability with compliance. Although less powerful than the models sold outside China, the chip supported AI inference tasks, making it a strategic offering in the world’s second-largest economy.
But even this scaled-back solution is now considered a potential risk. With US-China tech tensions escalating, Washington’s latest clampdown underscores a broader strategy to limit Beijing’s access to advanced AI technologies.
The impact is profound. Analysts at Bloomberg Intelligence estimate the new restrictions could cost Nvidia between US$14 billion and US$18 billion in annual revenue. If the controls persist, Nvidia’s China-related data centre revenue could drop back to low- to mid-single digits — levels not seen since early 2024, prior to the H20’s ramp-up.
Nvidia has long warned that intensifying restrictions could backfire, accelerating China’s push for self-reliance and hurting US competitiveness in the process. “Further tightening of restrictions risks weakening American companies while strengthening China’s resolve to build domestic alternatives,” the company has argued.
Adding to the political complexity, the new policy comes on the heels of a National Public Radio report suggesting that former President Donald Trump — now back in office — had been considering a softer stance on the H20 in exchange for Nvidia investing in US-based AI infrastructure. Nvidia has pledged up to US$500 billion in AI-related investments across the US over the next four years, though much of that was already in the pipeline.
The latest development reflects the continuation of a years-long geopolitical battle over semiconductor dominance. Initial curbs began in October 2022, when the US first barred sales of Nvidia’s most advanced AI chips to China. Since then, the restrictions have expanded significantly, covering a broader range of chips, semiconductor manufacturing tools, and high-bandwidth memory — all vital components in AI development.
The Biden administration extended these rules globally in its final weeks, aiming to close loopholes via third-party nations. The Trump administration now appears committed to maintaining, and potentially strengthening, that framework.
With Nvidia’s China strategy increasingly under pressure, the global semiconductor industry is bracing for further volatility — and investors are watching closely.
