Nvidia’s shares plummeted on Wednesday after the computer chip giant said it would cost $5.5 billion (£4.2 billion) as the US government tightened its export rules to China.
At the heart of the AI (AI) boom, the company demands a license to export H20 AI chips to the most popular China.
The rules come as part of an escalating trade war between the US and China, with the two countries introducing sudden trade tariffs on each other covering a variety of goods.
Nvidia’s shares fell almost 7% on Wednesday. Nasdaq Exchange IT is down 3.1% all day.
The company announced Tuesday that the US government last week announced that it needed permission to sell H20 chips to China, including Hong Kong.
The tech giant said federal officials advised the licensing requirements to be “effective for an indefinite future.”
” [government] The licensing requirements have shown that they address risks that may be used or decoupled on Chinese supercomputers,” Nvidia said.
The company declined to further comment when contacted by the BBC.
Marc Einstein of Counterpoint Research Consultancy said the $5.5 billion hit estimated by Nvidia is in line with his estimates.
But he said, “This is certainly a lot of money, but this is something that nvidia can withstand.”
“As we’ve seen in the last few days and weeks, this could primarily be a negotiation tactic. We wouldn’t be surprised to see exemptions and changes made to tariff policy in the near future.
Chips remains a battlefield in the US-China competition for a high-tech advantage, and US President Donald Trump wants to turbo-charge other regions with a very complex and delicate manufacturing process that has taken decades to perfection.
Nvidia’s AI chips have been a key focus of US export controls. Founded in 1993, it was originally known for creating types of computer chips that process graphics, especially for computer games.
Long before the AI revolution, they began adding features to that chip, saying it would be useful for machine learning. It is now considered an important company to look at to see how quickly AI-powered technology is spreading across the business world.
The company’s value hit in January when it was reported that rival Chinese AI app Deepseek was built at the cost of some of the other chatbots.
At the time, the US was thought to have been caught off guard by the technical achievements of its rivals.
Nvidia said the $5.5 billion fee is related to inventory, purchase commitments and related reserves H20 products.
Rui Ma, founder of Tech Buzz China Podcast, said he hopes that the US and China AI semiconductor supply chains will be “completely separated” if restrictions are maintained.
She added, “it makes no sense for Chinese customers to rely on US tips,” especially with oversupply of data centers in China.
