Nvidia, AMD Face Big Charges Due to US Chip Export Restrictions to China

Nvidia is bracing for a significant financial impact due to new export license requirements imposed by the Trump administration on its H20 chips, which are primarily designed for high-performance computing and artificial intelligence applications. According to a filing with the U.S. Securities and Exchange Commission (SEC), the company anticipates a $5.5 billion charge related to H20 chip inventories, purchase commitments, and associated reserves. This charge will likely be reflected in Nvidia’s first quarter earnings, which end on April 27, 2023. Following the announcement, Nvidia's stock price dropped by more than 5% in after-hours trading. The H20 chips were developed under the Biden administration's export control policies, which aim to restrict the sale of advanced computing chips to China to mitigate national security risks and maintain a competitive edge in the AI sector. While the new rules do not outright ban the export of H20 chips, they require Nvidia to obtain licenses for such transactions, a process that could complicate sales and lead to financial losses. Nvidia CEO Jensen Huang confirmed that the company is developing alternative products and exploring new sales channels to mitigate the impact, while also emphasizing the company's commitment to meeting global demand and maintaining its leadership in the high-performance computing market. In a broader context, the Trump administration is seeking to promote domestic semiconductor manufacturing and reduce reliance on foreign markets, particularly China, through measures like export controls and tariffs. The U.S. Department of Commerce is currently investigating the national security implications of semiconductor imports, which may inform future tariff decisions. This policy shift is aimed at bolstering national security and technological competitiveness, but it has created significant uncertainty for tech companies like Nvidia and AMD, both of which have substantial business interests in China. AMD, another major player in the semiconductor industry, is also facing potential financial losses due to the same export control measures. The company estimates that it could incur up to $800 million in charges related to H200 chip inventories and commitments if it fails to secure the necessary export licenses. Like Nvidia, AMD has been actively engaging with U.S. authorities to navigate these regulations and minimize the impact on its financial performance. The U.S. government’s restrictions on high-end AI chip exports to China and other specific countries are challenging companies that rely on the Chinese market, which is a key driver of growth in the data center and AI sectors. Swiss banking giant UBS has provided insights into the implications of these regulatory changes. According to UBS, Nvidia’s $5.5 billion inventory charge suggests that the company likely sold about $13 billion worth of H20 chips in the latter half of 2023, despite the export obstacles. Nvidia’s revenue from the Chinese market grew by 66% in the 2025 fiscal year, reaching $17.11 billion, compared to $10.31 billion in the previous year. This growth is attributed to the rapid expansion of China's data center and AI industries. In response to the export restrictions, Nvidia and other affected companies are exploring strategies to adapt. Nvidia has announced plans to invest $50 billion over the next four years in building AI supercomputers and data centers, a commitment that the White House has welcomed as a demonstration of the "Trump effect." Despite this investment, the company’s financial performance in the second quarter of the 2025 fiscal year saw a significant decline, indicating the severe impact of the regulations. Analysts from various financial institutions have voiced their concerns about the new rules. Bernstein analysts described the changes as "disruptive," while UBS analysts viewed them as effectively a ban on sales to China. Morgan Stanley analysts, while noting that these measures are not a complete ban, remain pessimistic about Nvidia’s ability to secure the required licenses. However, some analysts, such as those from BNP Paribas, believe that strong demand in other markets, especially for the H200 chip, could help offset some of the losses in China. Looking ahead, Nvidia and AMD may face even more stringent regulations. The Biden administration is expected to introduce new AI diffusion rules next month, which will affect exports to several countries beyond China, including Singapore, Mexico, Malaysia, the UAE, Israel, Saudi Arabia, and India. These rules could further exacerbate the companies' challenges by restricting the sale of a broader range of chips. The Trump administration is also considering targeted restrictions on DeepSeek, a leading Chinese AI research lab. These potential measures include banning DeepSeek from purchasing Nvidia’s AI chips and restricting Americans from using DeepSeek’s AI services without special permits. The government’s aim is to slow China’s AI advancements and protect U.S. technological leadership. However, experts warn that such policies could backfire by accelerating China’s efforts to develop its own AI technologies. The global nature of AI innovation means that overly restrictive measures might hinder the progress of key technologies worldwide. In summary, Nvidia and AMD are facing multifaceted challenges due to the Trump administration’s export control policies, aimed at protecting U.S. national security and technological superiority. The financial impact is significant, with Nvidia anticipating a $5.5 billion charge and AMD forecasting up to $800 million in losses. Both companies are taking steps to adapt, such as developing alternative products and expanding investments in the U.S. However, analysts and industry insiders caution that these policies may have broader negative implications for the global tech industry, potentially slowing technological advancements and fostering a more fragmented market. Nvidia’s and AMD’s ability to navigate these regulatory hurdles will be crucial for their future success and may serve as a model for other tech firms operating in this increasingly complex and uncertain environment.