Nvidia (NVDA) stock sank as much as 10% Wednesday after the AI chipmaker disclosed that it would take a $5.5 billion hit from the US government’s surprise new controls on its semiconductor exports to China.
Nvidia said in a regulatory filing late Tuesday night that the US government informed the company it would require a special license for exports of its H20 chips made specifically for the Chinese market to comply with US trade rules.
Notably, no licenses for GPU shipments into China have ever been granted, given the US government’s concern that the chips could be used to build AI supercomputers in the country, Jefferies analyst Blayne Curtis wrote in an analysis following the news that the latest rule is effectively a ban.
104.49
–
(-6.87%)
At close: 4:00:01 PM EDT
Other Wall Street analysts noted the move was a “surprise,” given a recent report from NPR that the Trump administration had backed off its plans to restrict Nvidia’s H20 chips following a dinner with CEO Jensen Huang at Mar-a-Lago.
Nvidia said it will incur $5.5 billion in charges in its first quarter from the latest curb.
Read more: How does Nvidia make money?
Jefferies’ Curtis projected the company will take an even bigger hit to revenue — $10 billion in lost sales — over the coming quarters. Curtis said that’s because the majority of the write-down is related to finished or partially finished goods rather than future supply agreements, meaning Nvidia will essentially have to toss out billions worth of now-unsellable chips rather than simply canceling future orders.
“Banning the H20 makes little sense to us,” wrote Bernstein analyst Stacy Rasgon in a note to investors early Wednesday. “H20 performance is low, well below already-available Chinese alternatives; a ban essentially simply hands the Chinese AI market over to Huawei.”
Raymond James analyst Ed Mills wrote in his own note: “The restrictions on H20 chips comes as a surprise, given explicit approval of the product by the Biden administration and recent media reports that the U.S. government was walking back from banning the product.”
Nvidia rival Advanced Micro Devices (AMD) also dropped Wednesday, declining more than 9% as the company said in a filing that its chip exports to China would also be restricted, costing the chipmaker up to $800 million. Fellow chip stocks Broadcom (AVGO) and Qualcomm (QCOM) sank around 6% and 4%, respectively, while Intel (INTC) dropped nearly 5%.
The stocks’ declines weighed on the tech-heavy Nasdaq (^IXIC), which fell 4%.
88.29
–
(-7.35%)
At close: 4:00:00 PM EDT
AMD AVGO QCOM
Nvidia has made multiple specialized chips for China since 2022 — the A800, H800, L20, L2, and the H800’s successor, H20 — to comply with ever-changing trade rules as the US looks to restrict China’s access to hardware necessary to innovate AI. China accounted for $17 billion, or 13%, of Nvidia’s revenue in its fiscal year 2025, Rasgon noted.