US chip giant Nvidia has revealed it expects to take a $5.5 billion financial hit following a decision by the US government to impose tighter restrictions on the export of its H20 AI chip to China. The move is the latest escalation in the ongoing US-China tech and trade war, which has seen increasing tariffs and export controls on both sides.
The H20 chip, a powerful component designed for artificial intelligence applications, has been one of Nvidia’s most in-demand products in the Chinese market. The company confirmed that US officials informed them last week that the H20 chip would now require a special export license to be sold to China and Hong Kong. The restrictions, which are indefinite, aim to prevent the chips from being used in Chinese supercomputers or being diverted to military or advanced AI uses.
Nvidia’s shares dropped nearly 6% in after-hours trading following the announcement. The estimated $5.5 billion loss includes costs tied to inventory, purchase commitments, and related reserves specifically for the H20 chip.
“This is certainly a lot of money, but it’s something Nvidia can bear,” said Marc Einstein of Counterpoint Research. He added that the situation may still evolve, suggesting that some exemptions or policy adjustments could emerge in response to broader impacts on the US semiconductor industry.
Nvidia has become a key player in the global AI race, initially known for its graphic processing units (GPUs) used in gaming. Over the years, it integrated machine learning capabilities into its chips, making them foundational to AI advancements across various sectors.
The US government’s move reflects growing concern over China’s rapid technological strides. Earlier this year, Chinese developers built a powerful AI chatbot, DeepSeek, at a fraction of the cost of its Western counterparts a development that reportedly caught US authorities off guard.
Analysts like Rui Ma, founder of Tech Buzz China, predict a full decoupling of US and Chinese semiconductor supply chains if these restrictions persist. “It doesn’t make sense for Chinese customers to rely on US chips,” she noted, especially with the surplus of data centers in China.
The chip war underscores the broader geopolitical struggle for technological dominance between the world’s two largest economies.
