- The U.S. government has tightened AI chip export rules, impacting Nvidia’s H20 processors.
- Nvidia’s stock fell sharply as revenue from China dropped amid growing competition.
Nvidia announced a $5.5 billion charge tied to export restrictions on its H20 AI chips to China and other markets, signaling a major financial setback. The company’s stock dropped over 6% in extended trading, reflecting investor concerns over tighter U.S. regulations and slowing growth in a key market.
disclosure is the strongest indication so far that Nvidia’s historic growth could be slowed by increased export restrictions on its chips, which the U.S. government says can be used to create supercomputers for military uses. Nvidia is scheduled to report its fiscal first-quarter results on May 28.
New Export Rules Disrupt Nvidia’s Business
The U.S. government informed Nvidia on April 9 that it would need a license to export its H20 chips to China and several other countries. These restrictions, first introduced in 2022 and expanded in 2023, aim to prevent advanced AI chips from being used in military supercomputers. The H20, a downgraded version of Nvidia’s flagship AI processors was specifically designed to comply with earlier rules but is now caught in stricter controls.
On April 9, 2025, the U.S. government, or USG, informed NVIDIA Corporation, or the Company, that the USG requires a license for export to China (including Hong Kong and Macau) and D:5 countries, or to companies headquartered or with an ultimate parent therein, of the Company’s H20 integrated circuits and any other circuits achieving the H20’s memory bandwidth, interconnect bandwidth, or combination thereof,
the notice stated.
Market Activity, The H20 Chip and Rising Competition
China, once a major revenue source for Nvidia, now accounts for just half of its pre-restriction sales. CEO Jensen Huang has warned of increasing competition, particularly from China’s Huawei, which Nvidia now lists as a direct rival. Despite efforts to adapt, the company faces challenges as Chinese firms turn to domestic alternatives.
The H20 is based on Nvidia’s older Hopper architecture and offers slower speeds than its U.S.-sold counterparts, the H100 and H200. While it was a stopgap solution for Chinese buyers, Nvidia is now shifting focus to its next-generation Blackwell AI chips. However, with new AI diffusion rules set to take effect soon, further restrictions could limit future sales.
On April 14, Nvidia revealed plans to invest hundreds of millions of dollars over the next four years to manufacture some AI chips domestically in the US. Despite this announcement, the latest filing and its predicted impact on the upcoming revenue report have not prevented a stock slump. “Truly no company is safe from tariffs,” commented the Kobeissi Letter.
Nvidia’s first quarter of fiscal year 2026 concludes on April 27. Shares in Nvidia (NVDA) are up 1.4% in the last 24 hours, trading at $112 according to Google Finance. Nvidia’s share price is down 22% so far this year, amid a broad market downturn driven by Trump’s escalating trade war and tariff threats.
Rival chipmaker Advanced Micro Devices (AMD) experienced a similar decline, falling more than 7% to $88.55 in after-hours trading, with its shares declining by over 25% since January 1.
Ongoing trade tensions and an uncertain regulatory landscape mean it’s path forward remains challenging. Nvidia said in Tuesday’s filing that the U.S. government told the company on Monday that the license requirement for H20 chips would be in effect for the indefinite future.