Nvidia has been hit with a $5.5 billion blow, with the U.S. moving to shut down exports of its China-focused H20 chip — a decision that has surprised the tech and investment space. I’m not surprised. We’ve seen this coming, but few expected the fallout to hit this hard.
On April 9, U.S. officials quietly informed Nvidia that shipping the H20 would now require a special licence. Five days later, Washington said this restriction isn’t temporary, but indefinite.
Nvidia didn’t alert all its customers in time. By April 15, the damage was evident. Shares plunged 6% in after-hours trading. The company had no choice but to take the charge.
The H20 is Nvidia’s most advanced AI chip that’s still legal for sale in China. It’s a workaround product — designed after earlier export rules stopped sales of more powerful chips like the H100 and A100.
While the H20 has slightly watered-down processing power, it still features rapid memory access and high-speed connectivity. Those features are good enough to raise eyebrows in Washington.
And here’s the thing, this chip was never really slow. It’s effective at inference — the stage where AI gives users answers. That’s where the market is heading. It was the perfect solution for Chinese giants like Tencent, Alibaba, and ByteDance, who were reportedly stocking up in bulk.
Even startups like DeepSeek were buying in aggressively. Their V3 model? Trained on H20s, according to a policy group in D.C.
“The Commerce Department is committed to acting on the President’s directive to safeguard our national and economic security,” a spokesperson said.
Behind the scenes, Chinese customers were still expecting deliveries by year-end — unaware that the game had changed. Analysts now expect a surge in demand for Huawei’s alternatives.
“By restricting the H20 system, U.S. regulators are effectively pushing Nvidia’s Chinese customers toward Huawei’s AI chips,” said Nori Chiou of White Oak Capital Partners. “Huawei’s chip design and software capabilities are likely to advance quickly as it gains more customers and development experience.”
The consequences involve China accounting for about $17 billion in Nvidia’s sales last year. That’s 13% of its global revenue. Losing that market — or even just slowing it — changes the forecast for Nvidia’s dominance. CEO Jensen Huang had already warned that revenue from China was down to half its former levels.
Worse still, competition inside China is heating up. Nvidia now lists Huawei as a direct rival. And that’s not symbolic — it’s strategic.
There’s also the matter of U.S. politics. Some voices in Washington say Nvidia’s chips could support China’s military supercomputing. The H20 may not have been built for that, but its connectivity potential sparked concern. With DeepSeek’s use of the chip under scrutiny and Tencent allegedly using H20s to train large AI models, it became harder for Nvidia to make its case.
“At least one of the buyers, Tencent, has already installed H20s in a facility used to train a large model, very likely in breach of existing controls,” the Institute for Progress wrote.
In the same breath, Nvidia has been pledging major investments in America. Just a day before the new restrictions went public, the company announced plans to build AI servers worth up to $500 billion in the U.S. over the next four years. The timing didn’t go unnoticed.
No one at Nvidia is saying much beyond the official filing. But we know what’s next: the company’s quarterly results are due on May 28. Until then, investors and regulators will be watching every move.
Right now, the world’s most valuable chipmaker is learning a tough lesson — sometimes, being caught in the middle of a geopolitical power play can cost you billions.
Comments 1