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Donald Trump’s administration is clamping down on Nvidia’s ability to sell artificial intelligence chips to China, sending the Silicon Valley giant’s shares sliding in pre-market trading and hitting Wall Street tech stocks.
Nvidia revealed recent US controls on American chipmakers’ sales to China in a late-night regulatory filing on Tuesday, by which it said it expected to take a $5.5bn earnings hit in consequence.
The curbs were subsequently confirmed by the commerce department, marking one other escalation in Donald Trump’s trade war with Beijing.
The chipmaker said its H20 chip, which is already tailored to comply with Joe Biden-era export controls that prevent the sale of its strongest chips in China, would now require a special licence to be sold to Chinese customers.
It continues to be unclear what number of such licences will likely be granted, but Nvidia said it will take a $5.5bn charge within the quarter to April 27 related to H20 chips for “inventory, purchase commitments, and related reserves”.
Analysts estimate Nvidia will generate about $17bn in sales to Chinese customers in the present financial yr.
Nvidia’s shares fell 7 per cent in pre-market trading on Wednesday, while futures tracking the tech-focused Nasdaq 100 index were down greater than 2 per cent.
Shares in Dutch chipmaking equipment company ASML sank 6 per cent after orders of its machines fell in need of expectations.
Stocks in Hong Kong also fell, led by leading AI chip buyers Alibaba, down almost 4 per cent, Baidu and Tencent, which each fell about 2 per cent.
The brand new US chip controls mark the newest salvo in a spiralling trade war between the world’s two largest economies. Earlier this month, the Trump administration imposed additional tariffs of 145 per cent on China, with a reprieve for some consumer electronics. Beijing matched the extra duties in retaliation.
The shortage of domestic chip suppliers in China capable of construct products to rival those of Nvidia had meant its tech corporations were flocking to purchase H20s, even within the face of Beijing’s steep import duties.
But that might change under the brand new US controls. For the reason that H20 chip is less powerful than those Nvidia can sell outside China, customers in the remaining of the world may be unwilling to purchase up stock that can’t be sold there.
Bernstein analysts on Tuesday said the H20 accounted for about $12bn of Nvidia’s $17bn revenues in China over the past yr. They added that there was still a scarcity of clarity on whether licences is likely to be granted, or whether it amounted to a full “wipeout” of the product line.
Nvidia said it was notified of the brand new controls on April 9 and was told on Monday that the licence requirement for H20 and any similar chips “will likely be in effect for the indefinite future”.
On Tuesday, White House press secretary Karoline Leavitt urged China to chop a brand new trade take care of the US, saying, “the ball is in China’s court”.
The US commerce department later confirmed it was issuing recent export licensing requirements for the H20, in addition to AMD’s MI308 and equivalent chips. It said it was “acting on the president’s directive to safeguard our national and economic security”.
The US move underscores Nvidia’s exposure to geopolitical tensions between Washington and Beijing. The chip designer has been at the center of the AI boom, and briefly last yr became the world’s most dear company.
On Monday, the Trump administration launched a national security probe that may lead to recent tariffs on semiconductors, because it holds off from immediately applying steeper levies on chips.
Nvidia’s chips are manufactured in Taiwan, so that they might be subject to import duties when sold to US-based customers.
The corporate said on Monday it will spend as much as half a trillion dollars on US AI infrastructure over the following 4 years through partnerships with corporations including Taiwan Semiconductor Manufacturing Company and Foxconn. The Financial Times had first reported on its investment plans.
Nvidia introduced its China-focused H20 processors last yr after the Biden administration imposed export controls on its chips. They’re less powerful than its top range of graphics processing units, or GPUs, coveted by Microsoft, OpenAI, Meta and Amazon.
Despite its reduced performance, the H20 has still seen solid demand in China. But Beijing has taken steps to encourage local tech corporations to make use of homegrown chips from corporations resembling Huawei, and will freeze out Nvidia’s products with recent energy efficiency rules.
