Nvidia shares sink after AI darling flags $5.5 bn charge on U.S. chip export curbs

Investing.com - Shares in Nvidia (NASDAQ:NVDA) tumbled by more than 7% in premarket U.S. trading on Wednesday after the semiconductor giant said it will incur a charge of up to $5.5 billion related to new U.S. chip export controls on China.

The announcement follows the U.S. government's decision to mandate licenses for exports of Nvidia's high-end H20 artificial intelligence chip to its key Chinese market. The H20 is the main AI chip Nvidia is permitted to sell in China under export restrictions originially imposed by the Biden administration, as Washington has sought to close off Beijing's access to cutting-edge advancements in AI tech.

A spokesperson for the U.S. Commerce Department said late on Tuesday that it was also issuing updated licensing requirements for exports of processors like Nvidia-peer AMD (NASDAQ:AMD)'s MI308 and similar products. The spokesperson said the move is in line with a directive from U.S. President Donald Trump to "safeguard [...] national and economic security."

AMD shares slumped prior to the opening bell on Wall Street, as well as rivals Broadcom (NASDAQ:AVGO), Super Micro Computer (NASDAQ:SMCI) and Intel Corporation (NASDAQ:INTC). U.S.-listed shares of major Nvidia supplier TSMC (NYSE:TSM) dropped as well.

The U.S. government communicated to Nvidia on April 9 that a license would be required for exporting the H20 integrated circuits, as well as any other circuits with similar memory and interconnect bandwidth capabilities, the firm said. On April 14, it was further clarified that this licensing requirement would remain in place indefinitely.

The measure is intended to prevent the potential use of Nvidia's products in Chinese supercomputers or military applications. Nvidia said the $5.5 billion charge is related to inventory, purchase commitments, and associated reserves for its H20 microchip products.

"Banning the H20 makes little sense to us," analysts at Bernstein said in a note to clients. "H20 performance is low, well below already-available Chinese alternatives."

The H20 is considered to be slower at training AI models than other products made for sale outside of China by Nvidia, although it is still viewed as a viable competitor in the field of inference, where an AI model can provide answers to users. Nvidia CEO Jensen Huang has previously said that Nvidia is well-positioned to dominate the inference market.

"The financial impact is small relatively, but the strategic blow is the focus of the market as Nvidia now has massive blockades going after the China market in the middle of this raging U.S./China tariff battle," Wedbush analysts wrote in a note. The White House has slapped steep levies of 145% on imports from China, while Beijing has responded with retaliatory duties of 125%.

"Nvidia is a key strategic asset for the U.S. and the Trump administration during this very tense period with China [...] and the White House is going to make sure [Huang] and Nvidia's chips do not land in China for now and help Beijing in the AI revolution."

Still, media reports suggested that Nvidia has recently seen strong demand for its H20 chips in China, as AI development and investment in the world's second-largest economy ramped up following the emergence of local start-up DeepSeek earlier this year.

The Information reported in April that Chinese firms including TikTok-owner ByteDance, Alibaba Group (NYSE:BABA) and Tencent Holdings Ltd (HK:0700) had ordered at least $16 billion worth of H20 chips in the first three months of 2025.

Nvidia did not warn at least some of its major Chinese customers in advance about the new U.S. export rules, Reuters reported, citing people familiar with the matter.

(Ambar Warrick, Frank DeMatteo and Reuters contributed to this report.)

This article first appeared in Investing.com