Nvidia stated on Tuesday that the US government will sell some of its artificial intelligence chips to China without a license and will require a license for future sales.
These restrictions mark the first major limitations imposed by President Trump’s administration on semiconductor sales overseas. This decision could lead to Nvidia’s sales to China diminishing in the near future, as the US has restricted the export of chips to its geopolitical rivals.
Nvidia has been striving to maintain sales to China amidst increasing government restrictions. In response to rules imposed by the Biden administration in 2022, Nvidia modified its main AI chip, the H100, to comply with the US government’s regulations. The resulting H20 chip has now become a product exclusively available in China.
NVIDIA is projected to incur a $5.5 billion expense against current quarterly revenues due to H20 inventory, purchase commitments, and related reserves.
The impact of these restrictions is more strategic than financial. Nvidia holds a dominant position in the semiconductor market for artificial intelligence systems. Selling chips to China is vital for its future, and losing access to this market could potentially benefit Huawei, a leading Chinese AI chip manufacturer, in challenging Nvidia globally.
“This decision will limit Nvidia’s reach in key markets and weaken its influence in the country,” stated Patrick Moorhead, a technology analyst at Moor Insights & Strategy. “Chinese companies may simply turn to Huawei as an alternative.”
Nvidia declined to provide a comment. The company’s stock price dropped over 5% in after-hours trading on Tuesday.
Commerce Department spokesperson Benno Kass announced on Tuesday that the government will be enforcing new export licensing requirements for NVIDIA H20 chips, AMD’s MI308 chip, and equivalents.
“The Commerce Department is dedicated to implementing the President’s directive to safeguard our national and economic security,” Kass remarked.
Nvidia announced changes to its regulatory filings on Tuesday, a day after earning praise from the White House for committing to invest $500 billion in US AI infrastructure. The company plans to begin manufacturing servers at its Houston plant and collaborate with a chip packaging company based in Arizona.
Despite these commitments, a regulatory submission revealed that NVIDIA will need to seek licenses from China for selling AI chips following notification from the Trump administration. The administration confirmed on Tuesday that the licensing requirements will remain in place indefinitely.
This development follows a meeting between Nvidia CEO Jensen Huang and Trump at a $1 million Mar-a-Lago dinner per person. Speculation arose that the US government might relent on its plans to restrict Nvidia’s sales to China.
Since taking office, the Trump administration has vowed to crack down on US support for Chinese AI companies. The emergence of Chinese startup Deepseek in recent months, which developed an AI system at a fraction of the cost typically spent by US companies, has raised concerns in Washington.
During his nomination hearing, Commerce Secretary Howard Lutnick emphasized the need to prevent Chinese companies from leveraging American technology to compete against the US.
Nvidia reported $17 billion in sales to China last year. As US government restrictions continue, the company’s operations face significant challenges, with sales to China dropping from about a fifth of Nvidia’s revenue in 2023 to 13% last year.
In its filing, NVIDIA did not indicate the impact of the licensing requirements on future sales. Analysts suggest that stock may be limited as the H20 chips have been modified to match the performance of the H100 chip, which can still be sold by US and European companies.
Source: www.nytimes.com
