Nvidia faces billions in costs due to new US rules on chip exports to China

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On New York's Wall Street, Nvidia's share price suddenly and unexpectedly fell by more than 6 percent after the close of trading. The reason for this is apparently a notification from the company to the US financial regulator that Nvidia expects additional costs of around 5.5 billion US dollars because the new US government is tightening export restrictions on AI chips for China. Accordingly, the Trump administration is demanding licenses for the export of Nvidia's H20 chips to various countries such as the People's Republic with immediate effect and for an indefinite period of time.

Nvidia and Co. have only been allowed to sell lame GPU accelerators to China since 2022. After Nvidia had initially used a loophole to export stripped-down versions of its AI accelerators there, the then US government under Joe Biden also banned these AI accelerators, known as A800 and H800, for China in 2023. The H20 chip is based on the same architecture (Hopper), but is specially adapted to the US export restrictions.

Tighter export rules already feared

Initially, Chinese companies spurned Nvidia's export chips, but earlier this year it was reported that Chinese companies were ordering more H20 chips from Nvidia for DeepSeek, the AI models developed in China. In addition, many observers and companies expected that the new US administration under Donald Trump might also restrict H20 exports to China, which may have also caused the increase in orders.

These fears have now been realized. Because in a mandatory notice to the US Securities and Exchange Commission (SEC) for a listed company, Nvidia explains that the US government informed Nvidia on April 9, 2025, that “a license is required to export the Company's H20 ICs and any other ICs that achieve memory bandwidth, interconnect bandwidth, or a combination thereof, to China (including Hong Kong and Macau) and the D:5 countries or to companies headquartered or parent companies there”.

Nvidia's AI chips now like arms exports

The D:5 countries mentioned can be found in a list from the Bureau of Industry and Security (BIS). The BIS is an agency of the United States Department of Commerce that deals with high technology and national security. D:5 describes countries with a US arms embargo, including Afghanistan, Iran, Iraq, North Korea, Libya, Russia, and Syria in addition to the People's Republic of China.

The US government is thus apparently putting H20 chips on a par with weapons, but according to the Nvidia press release, justifies the licensing requirement with the “risk that the affected products could be used in or diverted to a supercomputer in China”. The license obligation will therefore apply indefinitely from 14 April 2025.

Additional costs depress earnings and share price

These requirements are now putting pressure on Nvidia's business results, as the company further writes that “first quarter results are expected to include up to approximately $5.5 billion in costs related to H20 products for inventory, purchase commitments and related provisions”. The company's first quarter of fiscal 2026 ends on April 27, 2025.

Nvidia should be able to cope with these 5.5 billion dollars in additional costs, as the company recently scratched the 40 billion US dollar sales mark within a single quarter. At the same time, Nvidia makes 43 times more annual profit than AMD. Probably also with a view to the future, the stock market initially reacted skeptically to the new US export regulations and caused Nvidia's share price to fall by just over 6 percent. After all, China is an important sales market for the company. According to CNBC, Nvidia generated sales of 12 to 15 billion dollars in the country in 2024. This is likely to decrease from now on.

(fds)