Nvidia announced on Tuesday that the U.S. government has blocked the sale of certain artificial intelligence chips to China without a license and will require licenses for future sales. This move represents the first major limitation imposed by President Trump’s administration on semiconductor sales abroad, potentially ending Nvidia’s significant business in China.
The restrictions come as Nvidia has been working to maintain its sales in China despite growing U.S. government restrictions. In 2022, the Biden administration imposed rules to curb the export of Nvidia’s top A.I. chips to China. In response, Nvidia modified its leading A.I. chip, the H100, to create the H20 chip, a China-specific product that met U.S. government thresholds.
However, the new rule will prevent Nvidia from selling the H20 chip, resulting in a $5.5 billion charge against its revenue in the current quarter due to inventory, purchase commitments, and related reserves. Analysts believe this move will significantly impact Nvidia’s presence in China, potentially allowing Chinese chipmaker Huawei to gain traction.
Impact on Nvidia’s Business
“This kills Nvidia’s access to a key market, and they will lose traction in the country,” said Patrick Moorhead, a tech analyst with Moor Insights & Strategy. “Chinese companies are just going to switch to Huawei.” Nvidia dominates the market for semiconductors used in building artificial intelligence systems and considered selling chips to China vital to its future.
The loss of Nvidia’s sales to China could have long-term implications for the company’s global market share. With Huawei poised to fill the gap left by Nvidia, the Chinese chipmaker may challenge Nvidia’s dominance in the global AI chip market.
