Nvidia announced on Tuesday that the U.S. government has blocked the sale of some of its artificial intelligence chips to China without a license and will require a license for future sales. This move marks the first significant restrictions imposed by President Trump’s administration on semiconductor sales abroad and raises concerns that Nvidia’s sales to China may dwindle in the near future.
In response to previous restrictions by the Biden administration in 2022, Nvidia modified one of its leading AI chips, creating the China-specific H20 chip. However, the recent restrictions have led to a $5.5 billion charge against Nvidia’s revenue for the current quarter due to inventory, purchase commitments, and related reserves that cannot be sold or fulfilled under the new rule. This blow is seen as a major setback for the company strategically as it takes a hit in a key market.
The new licensing requirements will affect the Nvidia H20 chip, a chip from Advanced Micro Devices, and their equivalents. Analysts fear that Nvidia’s withdrawal from the Chinese market may result in lost sales to China’s leading AI chipmaker, Huawei. The company’s share price dropped over 5% in after-hours trading as a result of this news.
The change in export regulations comes after Nvidia was privately notified by the Trump administration last Wednesday that a license would now be needed to sell AI chips to China. This development occurred despite promises made by the company to invest $500 billion in AI infrastructure in the U.S. The Commerce Department is committed to safeguarding national and economic security from potential threats posed by Chinese tech giants stockpiling chips, while U.S. businesses struggle to acquire enough.
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