Nvidia Shares Fall on a $5B Charge as New US Export Rule Restricts H20 Chip Sales to China

Nvidia (NASDAQ:NVDA) shares dropped by over 6% in after-hours trading after it revealed in a Form 8-K filing yesterday that the US government has mandated it to secure a license for exporting its H20 product line to China, Hong Kong, Macau, and D:5 countries.

The government signalled that the license mandate is to mitigate the risks of China's supercomputers using Nvidia H20 integrated chips. While Nvidia was informed about the license on 9th April, the government told the chipmaker on Monday that the license rule is in effect for the indefinite future.

Nvidia estimated that as a result of the new export rule, it expects a £4.14 billion ($5.5 billion) charge linked to H20 products in fiscal Q1, ending on 27th April, due to existing inventory that could be difficult to sell, purchase commitments that might need to be revoked, and other related services.

Nvidia led the 2024 market rally on the AI hype, but the stock is down 16.45% year-to-date after US President Donald Trump's escalating tariff play triggered a market meltdown, wiping out trillions of dollars in company valuations.

Shares of Nvidia Suppliers Fall

Nvidia's supply chain is concentrated in Asia. Companies in the region manufacturing and supplying components to Nvidia witnessed their shares decline markedly during Wednesday trading hours.

For instance, Japan's testing equipment manufacturer Advantest shares were down 6.55% while semiconductor wafer producers like Samsung Electronics and Taiwan Semiconductor Manufacturing Co (TSMC) were down 3.36% and 2.51%, respectively. Meanwhile, memory module maker SK Hynix and assembly firm Wistron shares declined by 3.65% and 2.73%, respectively.

However, analysts from Bernstein led by Stacy A. Rasgon said the H20 chip export restrictions made 'little sense' to them as the product line's performance is lower than 'already-available' Chinese alternatives. The brokerage said it believes that the new US export rule 'simply hands the Chinese AI market over to Huawei.'

While Trump said his tariff plans are expected to drive domestic goods manufacturing, he hopes the high levies on China will lead the mainland to negotiate a better trade deal with the US.

Nvidia Reiterates Commitment to Boost US Manufacturing

Elsewhere, Nvidia reaffirmed earlier this week its commitment to invest £376.69 billion ($500 billion) over the remainder of this decade in the US, focusing on AI data centres and supercomputers through partnerships with TSMC, Foxconn, Wistron, Amkor and SPIL.

The AI giant said it is collaborating with its manufacturing partners to build factories to design and develop Nvidia AI supercomputers entirely in the US. Nvidia highlighted that it has commissioned over a million square feet of manufacturing space to build Blackwell chips and AI supercomputers in Arizona and Texas, respectively.

'The engines of the world's AI infrastructure are being built in the United States for the first time," said Nvidia CEO Jensen Huang. 'Adding American manufacturing helps us better meet the incredible and growing demand for AI chips and supercomputers, strengthens our supply chain and boosts our resiliency.'

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