Nvidia, a leading artificial intelligence chip maker, announced on Tuesday that the U.S. government has blocked the sale of some of its AI chips to China and will require a license for future sales. This marks the first major restriction that President Trump’s administration has imposed on semiconductor sales abroad.
In response to previous restrictions imposed in 2022, Nvidia modified its H100 chip to comply with U.S. regulations and created the China-specific H20 chip. However, the recent decision will result in a $5.5 billion charge against Nvidia’s revenue for the current quarter due to the inability to sell or fulfill H20 inventory and purchase commitments in China.
The restrictions pose a significant strategic blow to Nvidia, as sales to China were considered vital for its future growth. The company fears that withdrawing from the Chinese market could open doors for Chinese competitor Huawei to challenge its dominance in the AI chip industry globally.
The Trump administration’s directive to impose new export licensing requirements affects Nvidia’s H20 and Advanced Micro Devices’ MI308 chips. Despite Nvidia’s recent commitments to invest in A.I. infrastructure in the U.S., the licensing requirements will be in effect indefinitely.
This decision comes months after Nvidia’s CEO, Jensen Huang, met with President Trump at a high-profile dinner. Senator Elizabeth Warren has urged the administration to take swift action to restrict the H20 chip, as Chinese companies are reportedly rushing to stockpile these chips while U.S. businesses face shortages.
Nvidia reported $17 billion in sales to China last year, but this revenue is declining due to government restrictions. The company faces uncertainty regarding future sales in China as it navigates the complex regulatory landscape to comply with U.S. national security measures.
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