Nvidia takes a $5.5B hit following an AI chip export ban

Nvidia announced it will incur $5.5 billion in charges after the US government restricted exports of its H20 AI chips to China. The American company experienced a drop in shares, similar to AMD, which is also facing difficulties from the same embargo regarding its MI308 chip.

The US Commerce Department is “committed to acting on the President’s directive to safeguard our national and economic security,” stated a spokesperson for the department that oversees US export controls.

The H20 the AI chip in Nvidia’s portfolio, designed for clients in China, where the AI industry is booming. Companies that have increased their orders for the H20 include Tencent, Alibaba, and ByteDance, all major Chinese conglomerates.

Nvidia H20 is less powerful than certain other chips intended for markets outside China, as it is mainly focused on inference, which pertains to the speed at which AI models provide responses. Nvidia has already adjusted the chip architecture in response to the bans and restrictions imposed by the previous Biden administration, but it seems this effort no longer matters.

Jensen Huang, Nvidia CEO

The US Government indicated a risk regarding the use of H20 in supercomputers. Although the chip has reduced computing power, connecting multiple memory chips could still achieve high speeds. A nonpartisan think tank in Washington, D.C. reported that Tencent has already deployed H20 chips to train its model, which could circumvent the export ban and primarily benefit Chinese companies.

Nvidia stated on Tuesday that the government notified the company that the H20 chip would need a license for export, followed by a clarification a few days later that those regulations would be in effect indefinitely.

Nvidia stated that the $5.5 billion charge relates to H2O products for inventory, purchase commitments, and associated reserves.

Reuters noted that this news followed the company’s announcement of a commitment to build AI servers valued at $500 billion in the United States over the next four years, aligning with the Trump administration’s push for local manufacturing.

Source | Via