Nvidia expects $5.5bn hit as US tightens chip export rules to China

Microchip maker Nvidia said it would be hit with $5.5bn (£4.2bn) in costs after the US government tightened export rules to China.

The chip manufacturing giant, which has been at the heart of the artificial intelligence (AI) boom, will require licences to export its H20 AI chip to China, which has been one of its most popular.

The rules come amid an escalating trade war between the US and China, with both countries introducing steep trade tariffs on each other covering various goods.

Nvidia shares plunged almost 6% in after-hours trading.

Nvidia announced on Tuesday that the US government had told it last week that the H20 chip required a permit to be sold to China, including Hong Kong.

The tech giant said federal officials had advised them the licence requirement “will be in effect for the indefinite future”.

“The [government] indicated that the license requirement addresses the risk that the covered products may be used in, or diverted to, a supercomputer in China,” Nvidia said.

The company declined to comment further when contacted by the BBC.

Nvidia’s AI chips have been a key focus of US export controls. Founded in 1993, it was originally known for making the type of computer chips that process graphics, particularly for computer games.

Long before the AI revolution, it started adding features to its chips that it says help machine learning. It is now seen as a key company to watch to see how fast AI-powered tech is spreading across the business world.

The company’s value took a hit in January when it was reported that a rival Chinese AI app, DeepSeek, had been built at a fraction of the cost of other chatbots.

At the time, the US was considered to have been caught off guard by their rival’s technological achievement.

Nvidia said its $5.5bn charges would be associated with H20 products for inventory, purchase commitments and related reserves.