Shares of Nvidia (NVDA) plunged more than 7% Wednesday.
The drop came after the semiconductor powerhouse revealed it will take a $5.5 billion charge in its fiscal first quarter, stemming from unexpected U.S. export restrictions on its AI chips bound for China. The disclosure, made in a late Tuesday filing, marks a sharp escalation in the ongoing chip war between Washington and Beijing — and puts Nvidia’s China strategy under intense scrutiny.
The U.S. Commerce Department informed Nvidia earlier this month that its H20 chips — specifically designed to comply with previous export restrictions — will now require a license for shipment to China, Hong Kong, and Macau. According to analysts, those licenses are unlikely to be granted. The move effectively halts a revenue stream worth billions and underscores how geopolitical crossfire continues to reshape the landscape for AI and semiconductor players.
The H20 chips were developed as a workaround to U.S. regulations imposed during the Biden administration, which limited the performance of AI hardware exported to China. But now, under a more hawkish approach from the Trump administration, even those watered-down chips are facing barriers. Jefferies analyst Blayne Curtis estimated the total hit to Nvidia’s top line could reach $10 billion over the next few quarters, with the bulk of the write-down tied to unsellable inventory.
Market Fallout Rattles Chip Stocks
The fallout from the Nvidia announcement rippled through Wall Street on Wednesday. The PHLX Semiconductor Index (^SOX) dropped 3.75%, with chipmakers AMD (AMD) and Qualcomm (QCOM) sliding 6.63% and 2.05%, respectively. Broadcom (AVGO) also dipped nearly 3%. Intel slipped around 3%. The tech-heavy Nasdaq Composite fell over 2% as investors digested the new trade hurdle and braced for further policy volatility.
The fallout from the Nvidia announcement rippled through Wall Street on Wednesday. The PHLX Semiconductor Index (^SOX) dropped 3.75%, with chipmakers AMD (AMD) and Qualcomm (QCOM) sliding 6.63% and 2.05%, respectively. Broadcom (AVGO) also dipped nearly 3%. Intel slipped around 3%. The tech-heavy Nasdaq Composite fell over 2% as investors digested the new trade hurdle and braced for further policy volatility.
Nvidia’s latest challenge compounds a growing list of regulatory headwinds. The company had already warned of increased competition in China, where local players like Huawei and DeepSeek have ramped up capabilities using existing Nvidia hardware. Bernstein analyst Stacy Rasgon criticized the move, calling it counterproductive: “A ban essentially simply hands the Chinese AI market over to Huawei.”
Raymond James’ Ed Mills added that the restrictions contradict earlier reports suggesting that Washington would allow H20 chip shipments. The reversal, Mills noted, “raises uncertainty and raises questions” about the consistency of U.S. policy.
High Stakes for AI Leadership
The timing of the export ban raises broader questions about the U.S. government's strategy toward curbing China's AI ambitions. Nvidia had been walking a regulatory tightrope since 2022, crafting chips like the A800, H800, and eventually the H20 to comply with shifting U.S. rules. China represented 13% of Nvidia's revenue in its fiscal 2025, totaling approximately $17 billion.
The $5.5 billion charge includes write-downs for inventory and canceled sales commitments, suggesting Nvidia does not anticipate receiving export licenses. In essence, the chips built for China have become stranded assets. CEO Jensen Huang, speaking at the GTC conference in March, previously acknowledged the H20 was already underperforming compared to the company's latest "Blackwell" architecture — by a factor of 25x. That gap is now even more costly.
While Nvidia remains a dominant force in AI, recent developments add to a growing list of concerns for investors: tighter export rules, rising Chinese competition, and uncertain global demand. On Wednesday, shares fell to $104.20, now trading nearly 25% below January’s highs. The company’s long-term moat in AI remains intact, but the short-term turbulence is unlikely to dissipate soon.
The timing of the export ban raises broader questions about the U.S. government's strategy toward curbing China's AI ambitions. Nvidia had been walking a regulatory tightrope since 2022, crafting chips like the A800, H800, and eventually the H20 to comply with shifting U.S. rules. China represented 13% of Nvidia's revenue in its fiscal 2025, totaling approximately $17 billion.
The $5.5 billion charge includes write-downs for inventory and canceled sales commitments, suggesting Nvidia does not anticipate receiving export licenses. In essence, the chips built for China have become stranded assets. CEO Jensen Huang, speaking at the GTC conference in March, previously acknowledged the H20 was already underperforming compared to the company's latest "Blackwell" architecture — by a factor of 25x. That gap is now even more costly.
While Nvidia remains a dominant force in AI, recent developments add to a growing list of concerns for investors: tighter export rules, rising Chinese competition, and uncertain global demand. On Wednesday, shares fell to $104.20, now trading nearly 25% below January’s highs. The company’s long-term moat in AI remains intact, but the short-term turbulence is unlikely to dissipate soon.
A Volatile Road Ahead
As trade tensions flare once again, Nvidia finds itself at the epicenter of a broader geopolitical struggle over technological supremacy. The company's rapid rise as the de facto standard for AI infrastructure has made it both a symbol of U.S. innovation and a target of global regulation. With Washington now blocking even its compliance chips, Nvidia is being forced to rethink its global playbook.
Investors, meanwhile, are recalibrating expectations. While the AI boom remains a secular trend, Wednesday’s news reinforces how vulnerable even the most dominant players can be to shifts in policy. The semiconductor industry — long defined by cycles of supply and demand — is now increasingly shaped by diplomacy and defense.
Whether Nvidia can adapt and continue its meteoric growth will depend not just on its engineering prowess, but also its ability to navigate a world where chips are as much about politics as they are about performance.
As trade tensions flare once again, Nvidia finds itself at the epicenter of a broader geopolitical struggle over technological supremacy. The company's rapid rise as the de facto standard for AI infrastructure has made it both a symbol of U.S. innovation and a target of global regulation. With Washington now blocking even its compliance chips, Nvidia is being forced to rethink its global playbook.
Investors, meanwhile, are recalibrating expectations. While the AI boom remains a secular trend, Wednesday’s news reinforces how vulnerable even the most dominant players can be to shifts in policy. The semiconductor industry — long defined by cycles of supply and demand — is now increasingly shaped by diplomacy and defense.
Whether Nvidia can adapt and continue its meteoric growth will depend not just on its engineering prowess, but also its ability to navigate a world where chips are as much about politics as they are about performance.
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