Santa Clara, California – The Trump administration’s recent move to require Nvidia, a leading artificial intelligence chip company, to seek an export license to sell its H20 processor in China has significant implications. This decision has led Nvidia to write off up to $5.5 billion in inventory and purchase commitments in its fiscal first quarter, resulting in a 6.9% drop in Nvidia’s stock value on Wednesday.
The restrictions imposed by the U.S. government have forced Nvidia to reevaluate its sales strategy in China, a market that represents over 10% of its revenue. The H20 processor was specifically designed to comply with regulatory restrictions on selling advanced processors in China. With the uncertainty of being granted licenses for selling H20 processors in China, Wall Street analysts predict a challenging road ahead for Nvidia.
Analysts are closely monitoring the impact of these restrictions on Nvidia’s financial performance as the company prepares to report its fiscal Q1 results. The $5.5 billion write-off covers orders from major Chinese internet service companies like Alibaba, ByteDance, and Tencent. While some analysts see the loss of Chinese sales as manageable for Nvidia, others believe it could have a more significant impact on the company’s bottom line.
In addition to Nvidia, its rival Advanced Micro Devices (AMD) is also feeling the effects of the Trump administration’s curbs on AI chip sales to China. AMD expects to take a charge of up to $800 million to write off inventory and purchase commitments related to AI chip sales in China. The uncertainty surrounding the granting of export licenses adds another layer of complexity for AMD’s business operations.
As both Nvidia and AMD navigate these new restrictions, investors and industry experts are closely watching how these developments will impact the global semiconductor market. The ongoing trade tensions between the U.S. and China have created challenges for chipmakers, requiring them to adapt their strategies to comply with evolving regulations and safeguard their financial stability.