Nvidia announced on Tuesday that it will incur $5.5 billion in charges following new U.S. government restrictions on exporting its H20 AI chip to China, a crucial market for the high-demand product.
Nvidia’s AI chips have been a central target of U.S. export controls, as officials aim to prevent China from accessing cutting-edge technology and maintain America’s lead in the AI race.
In response, Nvidia started designing chips that push as close to the regulatory limits as possible without violating them, according to Reuters.
A U.S. Commerce Department spokesperson said late Tuesday that new licensing requirements are being introduced for the export of advanced chips, including Nvidia’s H20, AMD’s MI308, and similar models.
“The Commerce Department is committed to acting on the President’s directive to safeguard our national and economic security,” said the spokesperson of the department that oversees U.S. export controls.
AMD did not immediately respond to a request for comment. Its shares fell 7% in after-hours trading following the announcement.
The H20 is Nvidia’s most advanced chip available for sale in China and is crucial to its presence in the country’s thriving AI market.
Chinese companies such as Tencent, Alibaba, and ByteDance had been ramping up orders for the chip, driven by the growing demand for affordable AI models from the startup DeepSeek, as reported by Reuters in February.
Although the H20 chip is slower than Nvidia’s chips sold outside China when it comes to training AI models, it remains competitive in the inference stage, where AI models deliver responses to users. Inference is quickly becoming the largest segment of the AI chip market. Nvidia CEO Jensen Huang stated last month that the company is well-positioned to lead this shift.
Nvidia stated on Tuesday that the U.S. government is restricting H20 sales to China due to concerns that the chips could be used in supercomputers.
While the H20 has lower computing power compared to other Nvidia chips, its high-speed connectivity to memory and other computing chips still poses a potential risk.
The H20’s memory and connectivity features could make it suitable for building supercomputers in China, and the U.S. has had restrictions on selling chips for supercomputers to China since 2022.
On Tuesday, the Institute for Progress, a nonpartisan think tank in Washington, D.C., supported the restriction of H20 chips, arguing that Chinese companies were likely already using them to develop such systems.
“At least one of the buyers, Tencent, has already installed H20s in a facility used to train a large model, very likely in breach of existing controls restricting the usage of chips in supercomputers exceeding certain thresholds. DeepSeek’s supercomputer used to train their V3 model is also likely in breach of the same restrictions,” the group wrote.
