Nvidia says it might take a $5.5 billion hit after the Trump administration barred the chip designer from selling crucial artificial intelligence chips in China, sending shares in one of the United States’ most valuable companies plunging in after-hours trading.
The company said in an official filing that its H20 AI chip, which was designed specifically for the Chinese market, to comply with export controls, would now require a special license to sell there for the “indefinite future.”
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“The [government] indicated that the license requirement addresses the risk that the covered products may be used in, or diverted to, a supercomputer in China,” Nvidia said.
The U.S. government said that the new rules were in place to address the risk that its products might be “used in, or diverted to, a supercomputer in China,” as the U.S. competes with China in a battle for AI supremacy. This comes amid a trade war between U.S. and China with both countries having imposed sizable tariffs on each other.
Nvidia shares were down 6.5% in early trading on Wednesday. The Nasdaq exchange it was listed on was down 2.3%.
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The company’s value took a hit in January, when Chinese startup DeepSeek launched its AI model which turned out to be more cost-effective and efficient than leading U.S. models. Since then, competition over AI between the two countries has been fierce. Nvidia managed to recover from its losses and emerge as the second most valuable company according to its Q4 earnings report.
Rui Ma, founder of the Tech Buzz China podcast, said she expects the U.S. and China AI semiconductor supply chains to be “fully decoupled” if restrictions stay in place. She added: “It doesn’t make any sense for any Chinese customer to be dependent on U.S. chips” especially since there is an oversupply of data centers in China.