Nvidia Corp. NVDA has reportedly not communicated to some of its major Chinese customers about the new U.S. export rules affecting its AI chip.
What Happened: U.S. officials informed Nvidia on April 9 that its H20 chip would now require an export license for sales to China. Despite this, the chipmaker did not share this crucial information with some of its key customers in China, who were anticipating H20 deliveries by year-end, reported Reuters.
The new export rules are a part of Washington’s ongoing efforts to restrict China’s access to advanced semiconductors and maintain U.S. dominance in AI technology. These restrictions could significantly affect Nvidia’s business in China, one of its largest markets.
A spokesperson for Nvidia declined to comment when contacted by Benzinga.
Since the start of the year, the Jensen Huang-led company has secured orders worth $18 billion for its H20 chips. Chinese tech giants Tencent Holdings Ltd. TCEHY, Alibaba Group Holding Ltd. BABA, and ByteDance Ltd., the owner of TikTok, had increased orders for H20 chips due to the rising demand for affordable AI models.
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Why It Matters: The new export rules are expected to hit Nvidia’s bottom line. The chipmaker is set to take a $5.5 billion charge this quarter due to halted shipments of its H20 GPUs to China and several other markets.
The H20 is the main chip that Nvidia is legally allowed to sell in China, introduced following the implementation of the latest U.S. export restrictions in October 2023. According to analysts, Chinese AI chipmakers, especially Huawei, could benefit from the limitations placed on H20 as it offers alternatives to Nvidia’s product range.
Meanwhile, despite the potential semiconductor industry slowdown due to tariff uncertainties, Nvidia is expected to hold its ground. According to a recent analysis by Redburn Atlantic, Nvidia’s potential to endure the industry’s turbulence remains strong. The firm maintains a buy rating on Nvidia and has named it a ‘top pick’ for investors once the sector’s turbulence subsides.
Benzinga’s Edge Rankings highlight strong momentum and growth rankings for Nvidia in the 77th and 95th percentiles, respectively. Curious how other stocks stack up? Click here to uncover growth and momentum scores for top stocks.
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