Nvidia says it expects a $5.5 billion (£4.1 billion) hit after Donald Trump’s administration banned chip designers from selling important artificial intelligence chips in China.
In an official submission late Tuesday, the company said the H20 AI chip, specially designed for the Chinese market to comply with export controls, would require a special license to sell there for a “an indefinite future.”
The US government, which is fighting China in a race for AI hegemony, told Nvidia that new rules have been designed to address the risk that its products are “used or used in Chinese supercomputers.”
The chip designer is expected to report $5.5 billion in fees for the financial quarter ending April 27th due to its shares and sales commitment in H20 chips.
Nvidia, whose chips have driven massive development of artificial intelligence technology in recent years, has produced extraordinary returns for investors. Its stock has grown by more than 1,400% since 2020, making it one of the few companies worth trillions of dollars in the US.
However, news on Tuesday shows that Nvidia will fall by around 6% in after-hours trading in the US, potentially wiping billions of dollars at its opening bell on Wednesday.
In Asia, chipmakers have already begun selling, with Korean semiconductor businesses like Samsung Electronics and SK Hynix falling by 3% overnight. U.S. competitors’ advanced microdevice stocks also fell 7% in after-hours trading.
So far, the chip industry has been exempt from the 10% tariff that began on April 5, but Trump said this week that he will announce collections on imported semiconductors, adding that certain companies in the sector may have flexibility.
This week, the US Department of Commerce launched an investigation into the impact of tipping and drug imports on American national security.
The US relies heavily on chips imported from Taiwan. Trump was suspended last week along with almost all of his “mutual” tariffs, which placed a 32% tariff on products from the country.
After the newsletter promotion
On Tuesday, Nvidia announced separately that it plans to build up up to $500 million worth of AI infrastructure in the US over the next four years to begin to strengthen its presence in American manufacturing. Nvidia designs chips, but outsources production to contractors such as Taiwanese semiconductor manufacturers.
US officials under the Biden administration first banned Nvidia and other AI chip makers from selling the most advanced chips to China in October 2022. Chinese officials then strengthened their own control over the tools and processors needed to build semiconductors.
