US export restrictions on AI chips to China caused Nvidia a $5.5B loss and dragged down AMD shares too.
US-China Trade Tensions Hit Nvidia with Major Financial Blow
In a major blow to the tech industry, Nvidia has reported a significant loss of $5.5 billion due to new U.S. export restrictions targeting advanced AI chip sales to China, Hong Kong, and Macau. These measures have not only affected Nvidia’s financial outlook but also caused a sharp drop in the company’s stock price, along with a decline in shares of its main competitor, AMD.
Advanced Chips Now Require Export Licenses
On April 9, the U.S. government informed Nvidia that the export of some of its most advanced AI chips, including the H20 series and other high-bandwidth products, would now require official export licenses. These chips, essential for artificial intelligence and high-performance computing applications, were previously allowed for sale to China without major restrictions.
In response, Nvidia warned that its financial results for the first quarter of fiscal year 2026 may reflect up to $5.5 billion in expenses related to inventory write-downs, purchase obligations, and reserves tied to its H20 products. This indicates the broad impact of the new rules—not just on sales, but also on supply chains and production planning.
US Aims to Prevent Unauthorized Use of AI Chips in China
According to official statements from the U.S. government, the restrictions aim to prevent unauthorized use or transfer of advanced American technologies in Chinese military or supercomputing projects. The decision follows reports that Chinese AI startup DeepSeek had been using Nvidia chips, raising concerns about how U.S. technologies are being deployed abroad.
Although the Trump administration initially postponed the implementation of these restrictions after talks with Nvidia’s CEO Jensen Huang, the measures were eventually enforced due to escalating security concerns.
Domestic Investment Fails to Calm Markets
Interestingly, just a day before the earnings report, Nvidia had announced plans to invest hundreds of millions of dollars over the next four years to produce AI chips domestically in the United States. While this move aligns with U.S. efforts to bring chip manufacturing back home, it failed to prevent a sharp decline in the company’s stock value.
Following the announcement of the financial hit, Nvidia’s shares plummeted during daily trading. Shares of AMD, which also sells similar chips to the Chinese market, experienced a parallel drop, showing the broader impact of geopolitical tension on the semiconductor industry.
AI Technology Caught in Geopolitical Crossfire
This development is yet another sign of the intensifying rivalry between China and the United States in the field of advanced technology—a competition that has become increasingly strategic in recent years. As global economies grow more dependent on innovations like artificial intelligence, any restriction on the flow of these technologies can have far-reaching consequences for both tech giants and international financial markets.
As demonstrated in this case, political and geopolitical decisions can wipe out billions in market value within days. In such an environment, investors must be increasingly mindful of the risks posed by global trade tensions and regulatory shifts.
