Nvidia Faces $5.5 Billion Blow as U.S. Tightens Restrictions on Chip Sales to China

Nvidia reports it will incur a $5.5 billion financial loss after Washington imposed new restrictions on the export of its H20 artificial intelligence chips to China, in the latest round of a burgeoning war for AI supremacy. Its stock fell in response.

Although the H20 chip constructed last year was particularly designed to meet strict US export controls to China so that Nvidia would be able to continue selling to the nation, the model itself has less computing power than the more advanced H100 AI chip, prohibited from sale to China.

H20 is said to have helped DeepSeek successfully build its ChatGPT-style reasoning AI model R1, reportedly trained at a fraction of what American equivalents would cost. It shocked the technology sector and prompted an AI boom in China.

As specified by Reuters, the US Commerce Department will on Tuesday confirmed the introduction of import or new export licensing requirements for exportation to China of Nvidia's H20 chip and by other US chipmakers-AMD, MI308 chips, and all its equivalents.

DeepSeek, along with most of China's incumbent tech titans, have been big buyers of Nvidia's H20 graphic processing chips. Although Chinese tech giant Huawei and AI chipmaker Cambroon have come up with alternatives to H20s, China-produced chips tend to fall behind, especially in terms of software maturity, Counterpoint Research Associate Director Brady Wang has said.

With intensification of a bully trade war between China and the US, Ives stated further restrictions are on the way.

"While the Nvidia news is disconcerting, it's not a surprise since we're in the midst of a US-China trade war and anticipate further blows exchanged by both," he said.