Nvidia Takes $5.5B Hit as US Bans H20 AI Chip Exports to China
Nvidia announced that it will incur $5.5 billion in charges after the US government indefinitely restricted exports of its H20 artificial intelligence chip to China, a key market for the company as reported by Reuters. The export controls, aimed at safeguarding US national security, have targeted Nvidia’s most advanced AI chips amid intensifying competition with China in the global AI race.
Following the announcement, Nvidia shares fell approximately 6% in after-hours trading, while AMD, which also saw its MI308 chip affected, experienced a 7% drop.
H20 Chip at the Center of US-China Tech Tensions
The H20 chip, Nvidia’s most advanced offering still permitted for sale in China before the latest restrictions, had become a cornerstone of the company’s strategy to maintain presence in China’s booming AI sector. Chinese tech giants like Tencent, Alibaba, and ByteDance were reportedly ramping up orders, largely driven by demand from emerging AI developers such as DeepSeek.
According to Reuters, while the H20 is not as powerful as Nvidia’s chips available outside China for AI model training, it remains highly competitive for inference workloads, the process by which AI systems respond to user inputs. Inference is expected to become the dominant AI chip use case, and Nvidia CEO Jensen Huang recently asserted that Nvidia is well-positioned to lead that shift.
New Export Licensing Requirements Introduced
A US Commerce Department spokesperson confirmed that new licensing rules were being implemented for the H20, AMD’s MI308, and equivalent chips. The decision was driven by concerns that these chips could still enable supercomputing despite reduced computational capabilities due to their high-speed connectivity to memory and other processors.
According to think tank Institute for Progress, there is evidence that Chinese companies like Tencent and DeepSeek may already be using the H20 in breach of earlier controls. The organization argued that the H20’s high-speed interconnects make it suitable for supercomputer assembly, which has been under US export restrictions since 2022.
Also read: NVIDIA to Manufacture AI Supercomputers in Arizona and Texas
Impact on Nvidia and Industry Unclear
Nvidia announced that new US export restrictions now require licenses for all H20 chip exports to China, with the rules applying indefinitely. It's unclear if any licenses will be granted. As a result, Nvidia is taking $5.5 billion in charges tied to H20 inventory, purchase commitments, and reserves.
