Nvidia Faces $5.5 Billion Hit From U.S. Export Restrictions

Nvidia has announced that it will incur approximately $5.5 billion in expenses related to the export of its H20 graphics processing units (GPUs) due to new export restrictions imposed by the U.S. government. The company revealed in a recent filing that it received notification from the U.S. government on April 9, stating that it would need to obtain export licenses for its chips destined for specific countries and regions.

The $5.5 billion expense is expected to be recorded in the first quarter of the 2026 fiscal year, which ends on April 27, 2025. This cost is associated with inventory, procurement commitments, and related reserves for the H20 product line. The announcement underscores the potential slowdown in Nvidia's overall growth due to the increased export restrictions on its chips. The company's stock experienced a significant drop in after-hours trading following the news, highlighting the market's concern over the financial implications of these restrictions.

The U.S. government's decision to impose these restrictions is part of a broader effort to control the export of advanced technologies to certain regions. This move is likely to have far-reaching consequences for Nvidia, as it navigates the complexities of complying with new regulations while managing its financial obligations. The company's ability to adapt to these changes will be crucial in determining its future performance and market position.

Nvidia's H20 chip is designed to comply with U.S. export restrictions and is based on the previous generation of AI architecture known as "Hopper," which was released in 2022. The H20 chip is comparable to the H100 and H200 AI chips used in the U.S. and other regions, but it has slower interconnect speeds and bandwidth. The H20 chip is estimated to generate revenue between $12 billion and $15 billion in 2024.

In addition to the existing export controls, Nvidia will face new restrictions on the products it can export starting next month, according to the Biden administration's initial "AI proliferation rules." Nvidia has consistently argued that further restrictions on its chips could stifle competition and potentially weaken the U.S.'s technological edge. The company has previously stated that it has moved some of its operations, including testing and distribution, out of the U.S. following the implementation of export controls in 2022.

At a company meeting last month, Jensen Huang, the CEO of Nvidia, stated that the company would strive to comply with the law when asked about the export restrictions. Nvidia's stock has declined by 16% this year, primarily due to the announcement by the Trump administration of broad tariffs on major trading partners. Despite exemptions for various electronic products, including smartphones, computers, and semiconductors, Trump and some officials indicated over the weekend that these exemptions are temporary and part of a separate tariff plan for the industry.

Following Nvidia's disclosure, Advanced Micro Devices' stock fell by more than 7% in after-hours trading on Tuesday, while Broadcom, another AI chip manufacturer, saw its stock drop by nearly 4%. The new export restrictions are expected to have a significant impact on the semiconductor industry, as companies like Nvidia, Advanced Micro Devices, and Broadcom navigate the challenges of complying with new regulations while managing their financial obligations. The ability of these companies to adapt to these changes will be crucial in determining their future performance and market position.