Nvidia faces a major financial blow as the US tightens its control over advanced chip exports to China.
US Bans Nvidia’s H20 Chip Export to China
Nvidia has announced a $5.5 billion charge after the US government restricted the export of its powerful H20 AI chips to China. These chips were specially designed to follow US export rules while still serving the growing Chinese market.
Why the H20 Chip Matters
The H20 is Nvidia‘s top AI chip for China. It’s not as fast at training AI as some of its other models, but it works well during the “inference” phase—when AI gives answers to users. This phase is now the biggest part of the AI chip market, and Nvidia planned to dominate it with the H20.
High-Speed Connections Raise US Concerns
Although the H20 chip has lower computing power, it connects to memory and other chips at high speeds. This fast connectivity can help build supercomputers, which the US has banned from being powered by American tech in China since 2022.
Chinese Tech Giants Were Already Using H20 Chips
Chinese companies like Tencent, Alibaba, and ByteDance had been ordering large numbers of H20 chips. Demand was especially high due to startups like DeepSeek needing affordable AI chips to build large models.
Think Tank Claims China Is Building Supercomputers
The Institute for Progress, a US think tank, claimed Chinese companies were likely using H20 chips to build supercomputers—possibly breaking existing restrictions. They highlighted Tencent and DeepSeek as possible violators, saying their systems might exceed allowed performance levels.
Tencent Denies Any Violation
Tencent quickly responded, saying the claims were false. The company insisted it hasn’t broken any rules or built any supercomputers. It said it fully follows the law and called the think tank’s report inaccurate.
Think Tank Defends Its Statement
Tim Fist, who co-authored the report, said the conclusion was based on how AI companies usually install Nvidia servers. He admitted it’s possible Tencent followed the rules but doing so would mean accepting slower performance and higher setup costs.
US Government Puts Indefinite Block on H20 Exports
Nvidia said the US government informed them on April 9 that the H20 chip would now need a special license to be exported to China. By April 14, they were told these rules would remain in place permanently. It’s unclear if any licenses will actually be granted in the future.
Nvidia Takes Financial Hit Due to Unsold Inventory
The $5.5 billion charge includes losses from H20 inventory, purchase commitments, and related reserves. Nvidia didn’t comment beyond its official filing. The US Department of Commerce also hasn’t responded to the news yet.
Nvidia Plans $500 Billion AI Server Project in the US
Despite this setback, Nvidia is moving forward with new plans. On Monday, the company revealed it wants to build AI servers worth up to $500 billion in the US over the next four years. This project will be done in partnership with companies like TSMC and supports the Trump administration’s goal to boost local manufacturing.
