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Nvidia, a leading player in the microchip industry, has announced a projected financial impact of $5.5 billion (£4.2 billion) as a result of the newly tightened export regulations imposed by the United States on sales to China.
The company’s H20 AI chip, which has gained significant popularity, will now require special licensing for export to both China and Hong Kong, marking a significant shift in the operational landscape for Nvidia.
These new export controls come amid a backdrop of escalating economic tensions between the US and China, a situation exacerbated by the introduction of high tariffs on a range of goods by both nations.
In reaction to the announcement, Nvidia’s stock price dropped nearly 6% in after-hours trading.
On Tuesday, Nvidia revealed that it had been informed the previous week by US authorities that a permit would be necessary to sell its H20 chip to China and Hong Kong.
According to the company’s statement, federal officials indicated that this licensing requirement “will be in effect for the indefinite future.”
Nvidia noted that the licensing was aimed at mitigating risks associated with the potential use or redirection of these products toward supercomputers in China.
When contacted for further comments, Nvidia chose not to elaborate beyond its initial statements.
Marc Einstein, an analyst from Counterpoint Research, commented that the $5.5 billion estimate aligns with his projections, emphasizing that while substantial, it is a manageable sum for Nvidia.
He added, “This situation could serve as a negotiation tactic. There might be exemptions or adjustments to tariff policies soon, as these restrictions affect not only Nvidia but the wider US semiconductor sector.”
The ongoing chipset competition is critical in the broader context of the US-China rivalry for technological dominance. Current discussions around easing restrictions may emerge as the US government seeks to navigate this complex issue.
Nvidia’s chips are particularly significant within the scope of US export regulations. Founded in 1993, the company initially gained recognition for its graphics processing units (GPUs), primarily aimed at enhancing computer gaming experiences.
Nvidia began incorporating capabilities into its chips for machine learning long before AI became a mainstream trend, positioning itself as a critical entity in monitoring the growth of AI-integrated technologies across various industries.
Earlier this year, the company faced a decline in market value due to the emergence of a competing Chinese AI application known as DeepSeek, which reportedly was developed at a significantly lower expense compared to other chatbots available. This development raised concerns about the US’s preparedness to compete with advancements originating from China.
Nvidia specified that the anticipated $5.5 billion in expenses relates to its H20 products, including costs tied to inventory, purchase obligations, and related financial reserves.
Rui Ma, the founder of Tech Buzz China, suggests that should these restrictions persist, the semiconductor supply chains for AI technology between the US and China could become entirely independent. She remarked, “Relying on US chips would make little sense for any Chinese customer, especially given the surplus of data centers available within China.”
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