- Nvidia’s (NVDA) stock fell over 6% to $105.24 in after-hours trading after announcing a $5.5 billion charge tied to exporting H20 AI chips to China, prompted by U.S. export license requirements issued on April 9.
- The H20 chip, generating $12 billion to $15 billion in 2024, faces growing competition in China from firms like Huawei and DeepSeek, with revenue in the region dropping to half of pre-control levels, as noted by CEO Jensen Huang.
- New U.S. “AI diffusion” rules starting next month will further restrict Nvidia’s exports, adding pressure as the company approaches its fiscal first-quarter results on May 28.
Nvidia (NVDA), a titan in the semiconductor industry, is grappling with significant challenges as U.S. export restrictions tighten their grip on its operations, with its stock tumbling more than 6% to $105.24 in after-hours trading on Tuesday following a close at $112.20. The company disclosed a substantial $5.5 billion quarterly charge linked to exporting its H20 graphics processing units to China and other regions, a move prompted by a U.S. government directive on April 9 requiring licenses for such shipments to China and select countries. This development, detailed in a company filing, underscores the growing impact of geopolitical constraints on Nvidia’s business, particularly as the U.S. cites national security concerns over the potential military applications of AI supercomputers powered by these chips. The H20, designed specifically to comply with earlier U.S. export controls implemented in 2022 and refined in 2023, generated an estimated $12 billion to $15 billion in 2024, reflecting its critical role in Nvidia’s China market strategy despite reduced performance compared to the H100 and H200 chips used elsewhere, primarily due to slower interconnection speeds.
The export restrictions signal a potential slowdown in Nvidia’s meteoric growth, which has been fueled by its dominance in AI chip technology. CEO Jensen Huang highlighted the intensifying competitive landscape in China, noting on the February earnings call that revenue from the region had halved since pre-control levels, with Chinese tech giant Huawei emerging as a formidable rival, listed as a competitor in Nvidia’s annual filing for the second consecutive year. The competitive pressure is exemplified by DeepSeek, a Chinese AI firm that leveraged H20 chips to develop a market-disrupting AI model earlier this year. Further complicating Nvidia’s outlook are impending “AI diffusion” rules set to take effect next month, which will impose additional export limits. As Nvidia prepares to report its fiscal first-quarter results on May 28 – EPS consensus: $0.87, Revenue: $43.28 Billion – the interplay of regulatory hurdles, competitive dynamics, and financial pressures will likely shape investor sentiment and the company’s strategic path in the rapidly evolving AI chip market.
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