Nvidia shares tumbled more than 6% Wednesday after the chipmaker disclosed a $5.5 billion charge tied to new U.S. government export controls on semiconductors destined for China. The surprise announcement triggered a selloff in chip stocks and renewed concerns over deepening U.S.-China tech tensions.
In a regulatory filing late Tuesday, Nvidia said the U.S. government informed the company it would require a license for the export of its H20 AI chips - products specifically developed to comply with earlier trade restrictions targeting China. The controls, the company added, apply "for the indefinite future," jeopardizing a line of products that had become central to Nvidia's business in China.
"No licenses for GPU shipments into China have ever been granted," wrote Jefferies analyst Blayne Curtis, who called the new measure "effectively a ban." Nvidia's China revenue totaled $17 billion, or roughly 13% of its fiscal 2025 sales, according to Bernstein analyst Stacy Rasgon.
The H20 chips are among several tailored models Nvidia developed since 2022 - including the A800, H800, L20, and L2 - in an effort to navigate tightening U.S. export controls. The latest restriction deals a blow to that strategy and, according to Jefferies, could cost Nvidia as much as $10 billion in lost sales in the coming quarters.
AMD, which also makes high-performance AI chips, disclosed in a Tuesday filing that it could incur an $800 million charge due to similar restrictions. Shares of AMD fell more than 6%, while fellow chip stocks Broadcom, Qualcomm, and Intel also dropped. The tech-heavy Nasdaq Composite slid over 2% as semiconductor names weighed heavily on the index.
The U.S. Commerce Department confirmed the new rules apply to Nvidia's H20, AMD's MI308, and equivalent products. The Commerce Department is "committed to acting on the President's directive to safeguard our national and economic security," the agency said.
Nvidia's setback comes just two days after it announced a plan to invest up to $500 billion over four years in U.S.-based AI infrastructure, including chip production in Arizona and Texas. President Donald Trump, whose administration is leading the push to reorient global chip supply chains, claimed the move as a win for domestic manufacturing.
Analysts questioned the rationale for the ban, pointing out the H20's limited performance. "H20 performance is low, well below already-available Chinese alternatives; a ban essentially simply hands the Chinese AI market over to Huawei," Bernstein's Rasgon noted.
The controls also caught markets off guard. NPR reported last month that Trump officials had privately signaled a walk-back on the H20 restrictions after Nvidia CEO Jensen Huang dined with the former president at Mar-a-Lago. That report had prompted speculation that China-focused versions of Nvidia's chips would remain unaffected.
Sen. Elizabeth Warren previously urged Commerce Secretary Howard Lutnick to impose a ban on the H20, citing security concerns following the launch of DeepSeek, a Chinese AI chatbot trained using Nvidia's H800 chips.
Asian chip suppliers and equipment makers also suffered from the policy shock. Shares of Japan's Advantest and Disco Corp dropped 6.7% and 7.6% respectively, while Taiwan Semiconductor Manufacturing Co. slid 2.4%.
Raymond James analyst Ed Mills said the export block on Nvidia's H20 chips may yet be countered by a rollback of another pending rule, the "AI Diffusion" cap set to take effect May 15. "While this is a clear negative, it could be potentially offset by an altering or withdrawal of the country caps on Nvidia chips," he said.
