The US government has dealt a significant blow to NVIDIA, potentially costing the company $5.5 billion. New export restrictions on AI chips to China, imposed by the Trump administration, are to blame.
NVIDIA’s China Conundrum
The chip giant had received orders worth $16 billion from Chinese tech giants like Alibaba, Tencent, and ByteDance, as well as startups like DeepSeek. But the new rules require special licenses to export advanced AI chips to China – licenses that are never granted.
The H20 chip, designed specifically for the Chinese market, is now effectively banned from sale. NVIDIA is left with a stockpile of unsold chips from China and contracts at risk.
Market Fallout
NVIDIA’s stock plummeted nearly 6% after the news broke. The export ban could backfire, benefiting Chinese rivals like Huawei, which are cooking up their own AI chip alternatives.
This move may also speed up China’s quest for semiconductor self-sufficiency.
NVIDIA’s Response
In response, NVIDIA is planning to invest up to $500 billion in US AI supercomputing infrastructure over the next four years.
The company is also working on new chips that meet the latest export regulations, trying to minimize the financial hit and stay ahead in the global market.