Nvidia Faces $5.5 Billion Blow Amid New U.S. Export Curbs on AI Chips to China

Nvidia is bracing for a $5.5 billion financial hit after the Biden-era AI chip restrictions were expanded under the Trump administration, targeting its China-focused H20 chips. The move deepens the U.S.-China trade war and threatens to derail global innovation in artificial intelligence.

In a Tuesday filing, Nvidia said it had been notified by the U.S. government that H20 chips originally designed to comply with earlier export controls, now require a special license for sale to China. The restrictions, which also apply to AMD’s MI308 chips, take effect immediately and indefinitely.

Shares of Nvidia fell 5% in premarket trading Wednesday, as the company said it would include the losses from H20-related inventory, purchase commitments, and reserves in its upcoming earnings report on May 28.

A Strategic Blow for AI’s Top Player

The H20 chip, launched last year, enabled Nvidia to maintain business ties with Chinese tech giants despite previous bans on its more powerful H100 model. But its success also accelerated China's AI development. Most notably powering DeepSeek’s R1 model, a ChatGPT rival built at a fraction of the cost.

Now, Washington is tightening the leash.

“This disclosure is a clear sign that Nvidia now has massive restrictions and hurdles in selling to China,” analysts at Wedbush Securities said in a Tuesday note. “The Trump administration knows there is one chip and company fueling the AI revolution and it’s Nvidia.”

China accounted for 13% of Nvidia’s revenue last year. While local alternatives like Huawei and Cambroon have developed AI chips, analysts say they continue to lag in performance, especially on the software side.

Washington's Growing AI Red Line

The new licensing requirements are part of a wider U.S. strategy to curb China's tech ascent. The Commerce Department confirmed Tuesday it was enforcing tighter restrictions on AI chip exports “to safeguard our national and economic security.”

These controls aren’t new. They build on a framework introduced under President Biden, which limited chip sales, semiconductor equipment, and high-bandwidth memory destined for China or routed through third countries. That system, now broadened under Trump, includes a global licensing structure to prevent circumvention.

AI chipmakers have voiced concern over the mounting restrictions.

Ned Finkle, Nvidia’s VP of government affairs, wrote that while AI adoption drives innovation globally, the export bans threaten that progress. “These measures risk derailing global innovation and economic growth,” he said in a blog post.

Global Trade and Growth at Risk

The World Trade Organization added fuel to the fire Wednesday, slashing its forecast for global trade growth due to rising tariffs and geopolitical uncertainty. It now expects global GDP to grow just 2.2% in 2025, down from a projected 2.8%. In North America, the impact is sharper, with growth down 1.6 percentage points from prior estimates.

“While the Nvidia news is concerning, it’s not a shock,” said Dan Ives of Wedbush. “We expect more punches thrown by both sides as the U.S.-China trade war escalates.”

For now, the fallout remains to be seen, not only for Nvidia, but for the global AI race it helped ignite.

‍