Nvidia faces $5.5 billion hit as US tightens China export controls on AI chips

Nvidia said on Tuesday that it expects to take a $5.5 billion charge in the current quarter after the U.S. government imposed new licensing requirements on exports of its H20 graphics processing units (GPUs) to China and other countries. The announcement sent Nvidia shares tumbling over 6% in after-hours trading, erasing billions in market value ahead of Wednesday’s market open.

In a regulatory filing, Nvidia revealed that on April 9, it was informed by the US government that shipping H20 chips to China and several other regions would now require a licence. The restrictions reflect Washington’s concern that such advanced chips could be used in military-grade supercomputing.

The move signals a significant roadblock in Nvidia’s rapid growth story, as geopolitical tensions continue to reshape the global semiconductor market.

H20 chips: Built for China, now blocked again

The H20 chip, launched as a compliant alternative under prior U.S. export restrictions in 2022 and 2023, was specifically tailored for the Chinese market. Despite these limitations, the chip generated an estimated $12–15 billion in revenue in 2023.

But even before this latest setback, Nvidia had flagged weakening China sales. In its February earnings call, CEO Jensen Huang stated that revenue from China had halved since the U.S. introduced chip export controls. He also noted growing competition from Chinese tech giant Huawei, which Nvidia has listed as a key rival in consecutive annual reports.

China still a vital market

China remains Nvidia’s fourth-largest market, after the U.S., Singapore, and Taiwan. More than 50% of Nvidia’s revenue in the last financial year came from U.S.-based clients, according to the company’s annual report.

The new licensing rule for H20 chips will remain in place “for the indefinite future,” the company said in its filing.

Market impact and broader trade concerns

So far this year, Nvidia shares are down 16%, partly due to former President Donald Trump’s proposed tariff actions targeting major trading partners. While some electronics, including semiconductors and smartphones, have received temporary exemptions, Trump has hinted that sector-specific tariffs—including a 10% tariff on imported semiconductors—could be rolled out soon.

Trump also suggested that flexibility may be offered to certain companies, though specifics remain unclear.

Nvidia’s long-term outlook

Despite the latest turbulence, Nvidia’s performance over the last four years has been extraordinary. The company’s stock has surged over 1,400% since 2020, riding the AI boom and cementing its status as one of the few trillion-dollar U.S. tech giants.

However, with the chip sector now caught in the middle of intensifying U.S.-China trade tensions, investors will need to brace for more volatility ahead—particularly as regulatory risks begin to affect Nvidia’s top international markets.

Nvidia is scheduled to report its first-quarter earnings on May 28.