Nvidia is caught in the middle of an escalating trade war
between the world’s two largest economies.
Nvidia on Tuesday said it will take a $5.5 billion financial
hit after Washington placed fresh restrictions on the export of its H20
artificial intelligence chips to China, in the latest escalation of a growing
battle for AI dominance.
Nvidia (NVDA) slumped more than 7% Wednesday after tumbling
during premarket trading. The export restrictions on Nvidia come as President
Donald Trump’s tariffs are roiling global markets and raising concerns about
the prospects for global economic growth.
The World Trade Organization on Wednesday said its
expectations for global trade this year have “deteriorated sharply” owing to
the battery of new tariffs on goods and uncertainty around future trade policy.
The H20 chip, released just last year, was purposefully made
to accommodate stringent US export controls to China and allowed Nvidia to
continue selling to the country. The model has less computing power than the
more powerful H100 AI chip, which has already been banned for sale to China.
“Nvidia specifically designed the H20 to comply with US
exports restrictions…now the rules change and they lost $5 billion,” said Jay
Hatfield, chief executive at Infrastructure Capital Advisors. “So this
inconsistent trade policy is costing companies a lot of money.”
The H20 is believed to have contributed to DeepSeek’s
successful development of its ChatGPT-like reasoning AI model, R1, which was
said to be trained at a fraction of the cost of American equivalents. The
development stunned the tech industry and sparked an AI revolution in China.
Nvidia said in a Tuesday regulatory filing that it was
informed by the US government last week the H20 chips would now require a
special license to be exported to China, which accounted for 13% of sales last
year.
The chipmaker said it will report approximately $5.5 billion
worth of charges in its first quarter’s earnings on May 28, associated with H20
products for “inventory, purchase commitments, and related reserves.”