Nvidia loses $5.5B in Trump’s trade war with China

The recent actions of the Trump administration have had a considerable impact on Nvidia’s business dealings, resulting in a $5.5 billion charge for the GPU company. This situation arose due to newly imposed export controls that essentially have hindered Nvidia from selling their H20 AI accelerators in China, Hong Kong, and other regions of concern. The U.S. government does have the discretion to issue licenses that may allow some orders to be processed into China, but Nvidia is currently facing limitations on its ability to deliver these products as expected.

Nvidia, a significant player in the GPU market, was made aware of these restrictions on April 9. The regulatory filing submitted to the U.S. Securities and Exchange Commission (SEC) clarifies that the export controls are intended to prevent these chips from reaching Chinese supercomputers. It is plausible that Nvidia might still be able to distribute the H20 accelerators for other purposes at a later point. However, the financial repercussions of this situation are evident, with Nvidia expecting charges of up to $5.5 billion in its first fiscal quarter to cover associated expenses with the H20 products, including inventory, purchase commitments, and other related expenses.

Despite expectations following a high-profile dinner between Nvidia’s CEO and President Trump, it seems that these export controls are being enforced nonetheless. The aftermath of the dinner led to a pause in the initial plans to enforce such restrictions on Nvidia’s products, but the recent filing suggests some clampdown by the Trump administration, altering Nvidia’s revenue prospects for the current quarter. This development comes amidst Nvidia’s larger strategic initiative to scale up its manufacturing operations in the U.S., suggesting that approvals for shipping H20 accelerators to China may be contingent on these broader arrangements.

This is not the first time Nvidia has faced challenges with exporting its accelerators to China. Since late 2022, there have been incremental limitations imposed by the U.S. government on the performance of AI accelerators sold to China. With every new restriction, Nvidia had to revise its designs to limit performance, either through bandwidth reduction or other modifications. The current restrictions encompass Nvidia’s H20 integrated circuits and any other circuits that mirror the H20’s specifications, as revealed in the recent SEC filing.

With Nvidia’s stock experiencing a decline of over six percent in after-hours trading following this news, it is apparent that these measures have immediate repercussions on the company’s valuation. Nevertheless, it remains to be seen how Nvidia may navigate these obstacles and potentially recover lost revenues from delayed or restricted product sales in subsequent quarters.