Nvidia's shares took a significant hit on Wednesday following the company's announcement that recent US export restrictions on its AI chips destined for China could result in losses of up to $5.5bn this quarter.
This development, part of an escalating series of trade and technology restrictions between Washington and Beijing, has unsettled markets already jittery over tariff uncertainties and mounting geopolitical tensions, as reported by .
Trump's trade war bruises chip exports
A regulatory filing late on Tuesday revealed that the US government had informed Nvidia on 9th April that its H20 chip, designed for the Chinese market and compliant with previous restrictions, would now require an export license.
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The H20 – a high-performance GPU optimised for AI interference – is the most advanced AI chip that Nvidia can legally export to China.
Nvidia made the change public later on, catching even some of its major Chinese customers off guard, according to Reuters.
Companies like Baidu, Tencent, and Alibaba, which reportedly placed orders worth $16bn for the H20 in Q1 alone, had been anticipating shipments before the end of the year.
The US government has now made the licensing requirement indefinite, leading Nvidia to write down inventory, cancel commitments, and book the $4.4bn charge.
The restrictions on the H20 chip come amid escalating trade tensions. Last week, President Donald Trump increased tariffs on Chinese imports to 145%, prompting Beijing to retaliate with 125% duties on US goods.
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Despite a three-month delay on some of Trump's wider tariff measures, markets continue to be apprehensive about the long-term trajectory.
The US action is the most recent in a series of steps aimed at preventing China from gaining access to high-end AI hardware – a crucial component in military and tech competition.
Nvidia takes a tumble
Nvidia's shares plummeted over six per cent in after-hours trading on Tuesday, dragging Nasdaq futures down 1.1 per cent on Wednesday morning.
S&P 500 futures fell by 0.5 per cent, while Dow Jones futures remained steady, indicating that the impact was primarily felt in the tech sector.
Semiconductor counterparts AMD and Intel also saw a dip in early markets, as did Dutch equipment giant ASML, which failed to meet earnings expectations and dropped over six per cent.
"Export restrictions are the new weapon in the US-China rivalry, and Nvidia is caught in the crossfire", stated Russ Mould of AJ Bell. "The $5.5bn hit marks a new chapter in this tit-for-tat."
David Morrison, senior analyst at Trade Nation, added: "Markets were fairly quiet before this, but Nvidia's after hours shock has changed the tone. It looks like the eye of the storm, not the calm before it."
Wider tech fall-out
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In Asia, tech stocks echoed the overnight panic. Hong Kong's Hang Seng dropped 2.2 per cent, while Japan's Topix slipped more than one per cent.
China's leading chip customers and suppliers faltered amid concerns that the US export squeeze could widen.
"This uncertainty is bad for everyone", stated Steve Clayton of Hargreaves Lansdown. "Nvidia's restriction has created wider doubts about where the US-China trade relationship is heading".
Ben Barringer, a global tech analyst at Quilter Cheviot, highlighted the wider implications.
He commented: "Nvidia's licence requirement feeds down the supply chain to ASML and others. A $13bn revenue hit isn't catastrophic, but it's material- and it's happening in a tough environment already burdened by volatility."
In the meantime, the White House's stance on trade remains unpredictable. Treasury secretary Scott Bessent is slated to meet with South Korea's minister next week, while China appointed a new top trade negotiator, demanding more "respect " from Washington before resuming formal discussions.
As one analyst succinctly put it, "this isn't just a chip story – it's a geopolitical story with a tech ticker symbol."