Nvidia has announced that it is expecting a $5.5 billion (£4.1 billion) impact following the ban imposed by Donald Trump’s administration on chip designers selling crucial artificial intelligence chips in China.
In an official statement released late Tuesday, the company disclosed that the H20 AI chip, specifically tailored for the Chinese market to comply with export regulations, will now require a special license for sale in China indefinitely.
The US government, engaged in a competition with China for AI supremacy, informed Nvidia that new regulations have been enacted to mitigate the risk of their products being utilized in Chinese supercomputers.
As a result, the chip manufacturer is set to incur $5.5 billion in losses for the financial quarter ending on April 27th due to its investment in H20 chips.
Nvidia, known for driving significant advancements in AI technology, has delivered substantial returns for investors, with its stock surging over 1,400% since 2020, making it one of the few trillion-dollar companies in the US.
However, the news on Tuesday caused Nvidia’s stock to fall by approximately 6% in after-hours trading, potentially wiping out billions of dollars in market value by Wednesday’s opening bell.
In Asia, chipmakers like Samsung Electronics and SK Hynix from South Korea saw a 3% decline in their stocks overnight, while US competitors like senior equity microdevices dropped by 7% in after-hours trading.
Although the chip industry has been exempt from the 10% tariff that began on April 5th, Trump indicated this week that he plans to impose tariffs on imported semiconductors and mentioned that some companies in this sector may have flexibility.
The US Department of Commerce has recently launched an investigation into the impact of chip and drug imports on national security.
The US heavily relies on chip imports from Taiwan, with Trump previously imposing a 32% tariff on products from the country before suspending most tariffs last week.
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Nvidia also revealed plans to invest up to $500 million in AI infrastructure in the US over the next four years to bolster its American manufacturing presence. While Nvidia designs chips, it outsources production to contractors, including Taiwanese semiconductor manufacturers.
Under the Biden administration, US officials had initially barred Nvidia and other AI chip manufacturers from selling advanced chips to China in October 2022. In response, Chinese authorities tightened controls over the tools and processors necessary for semiconductor production.
Source: www.theguardian.com
