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The Trump administration is tightening restrictions on Nvidia’s sale of artificial intelligence chips to China, leading to a drop in the company’s stock prices and affecting tech stocks on Wall Street.
Nvidia disclosed the new US controls on chip sales to China in a regulatory filing on Tuesday, expecting a $5.5bn earnings impact as a result.
These restrictions, confirmed by the commerce department, escalate the trade war between the US and China.
Under the new rules, Nvidia’s H20 chip, already compliant with export controls, will now require a special license for sales to Chinese customers. The company anticipates a $5.5bn charge related to H20 chips.
Analysts estimate Nvidia’s sales to Chinese customers to be around $17bn this year.
Following the announcement, Nvidia’s shares dropped by 6% in pre-market trading, impacting Nasdaq 100 futures and other tech stocks.
Other companies, like ASML and AMD, also saw declines in their stock prices due to lower-than-expected orders and market uncertainties.
The US-China trade tensions have been escalating, with recent tariffs imposed by both sides, impacting various industries including tech.
The new chip controls could significantly impact Nvidia’s revenues in China, with uncertainties around license grants and product line continuation.
Nvidia was informed of the controls on April 9 and was notified about the license requirement for H20 chips on Monday.
The White House is urging China to negotiate a new trade agreement with the US in response to these developments.
The US commerce department is implementing new export licensing requirements for H20 and AMD chips to safeguard national security.
Nvidia’s exposure to geopolitical tensions is highlighted by these developments, with potential tariffs on semiconductors impacting its operations.
The company plans to invest in US AI infrastructure and continue partnerships with key players in the industry.
Despite challenges, Nvidia remains a significant player in the AI market, adapting to regulatory changes and market demands.
Beijing’s focus on promoting local chip manufacturers could pose challenges for Nvidia in the Chinese market.