Nvidia inventory dives as chipmaker sees $5.5 billion hit from ‘shock’ China chip controls

Nvidia (NVDA) inventory sank as a lot as 6% early Wednesday after the AI chipmaker disclosed that it might take a $5.5 billion hit from the US authorities’s shock new controls on its semiconductor exports to China.

Nvidia mentioned in a regulatory submitting late Tuesday evening that the US authorities knowledgeable the corporate it might require a particular license for exports of its H20 chips made particularly for the Chinese language market to adjust to US commerce guidelines.

Notably, no licenses for GPU shipments into China have ever been granted, given the US authorities’s concern that the chips might be used to construct AI supercomputers within the nation, Jefferies analyst Blayne Curtis wrote in an evaluation following the information that the newest rule is successfully a ban.

Different Wall Avenue analysts famous the transfer was a “shock,” given a latest report from NPR that the Trump administration had backed off its plans to limit Nvidia’s H20 chips following a dinner with CEO Jensen Huang at Mar-a-Lago.

Nvidia mentioned it would incur $5.5 billion in costs in its first quarter from the newest curb.

Learn extra: How does Nvidia generate income?

Jefferies’ Curtis projected the corporate will take a fair larger hit to income — $10 billion in misplaced gross sales — over the approaching quarters. Curtis mentioned that is as a result of the vast majority of the write-down is said to completed or partially completed items moderately than future provide agreements, that means Nvidia will primarily should toss out billions value of now-unsellable chips moderately than merely canceling future orders.

“Banning the H20 makes little sense to us,” wrote Bernstein analyst Stacy Rasgon in a notice to buyers early Wednesday. “H20 efficiency is low, nicely beneath already-available Chinese language alternate options; a ban primarily merely arms the Chinese language AI market over to Huawei.”

Raymond James analyst Ed Mills wrote in his personal notice: “The restrictions on H20 chips comes as a shock, given express approval of the product by the Biden administration and up to date media reviews that the U.S. authorities was strolling again from banning the product.”

Nvidia rival Superior Micro Units (AMD) additionally dropped greater than 6% Wednesday, as Morgan Stanley famous the brand new US chip controls may have an effect on exports of its semiconductors as nicely. Fellow chip shares Broadcom (AVGO) and Qualcomm (QCOM) sank greater than 2%, whereas Intel (INTC) dropped roughly 3%.

The shares’ declines weighed on the tech-heavy Nasdaq (^IXIC), which fell greater than 2%.

Nvidia has made a number of specialised chips for China since 2022 — the A800, H800, L20, L2, and the H800’s successor, H20 — to adjust to ever-changing commerce guidelines because the US appears to limit China’s entry to {hardware} essential to innovate AI. China accounted for $17 billion, or 13%, of Nvidia’s income in its fiscal 12 months 2025, Rasgon famous.