Nvidia has said it expects a $5.5bn (£4.1bn) hit after Donald Trump’s administration barred the chip designer from selling crucial artificial intelligence chips in China, sending shares in one of the US’s most valuable companies plunging in after-hours trading.
The company said in an official filing late on Tuesday that its H20 AI chip, which was designed specifically for the Chinese market, to comply with export controls, would now require a special licence to sell there for the “indefinite future”.
The US government, which is battling China in the race for AI supremacy, told Nvidia the new rules were designed to address the risk that its products might be “used in, or diverted to, a supercomputer in China”.
The chip designer now expects to report $5.5bn in charges in its financial quarter that ends on 27 April, because of stocks of H20 chips and sales commitments.
Nvidia, whose chips have helped drive huge developments in AI technology in recent years, has produced extraordinary returns for its investors. Its shares have risen by more than 1,400% since 2020, making it one of the few businesses in the US worth trillions of dollars.
However, the news on Tuesday sent Nvidia shares down about 6% in after-hours trading in the US, which could wipe off billions from its market value at the opening bell on Wednesday.
A chipmaker sell-off has already started in Asia, with South Korean semiconductor businesses such as Samsung Electronics and SK Hynix falling by as much as 3% overnight. In Europe, shares in ASML dropped 5% in early trading after its chief executive, Christophe Fouquet, said: “The recent tariff announcements have increased uncertainty in the macro environment and the situation will remain dynamic for a while.” The Dutch company, which produces lithography machines used to make chips, also reported that orders in its first financial quarter were €3.94bn (£3.37bn), about €1bn less than investors had expected.
Shares in the US competitor Advanced Micro Devices also fell 7% in after-hours trading.
While so far the chip industry has been exempt from the 10% tariffs that started on 5 April, Trump said he would announce a levy on imported semiconductors over this week, adding that there could be some flexibility for certain companies in the sector.
This week, the US Department of Commerce initiated an investigation into the impact of imports of chips and pharmaceuticals on American national security.
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The US relies heavily on chips imported from Taiwan. Trump placed a 32% tariff on products from the country, although this was suspended along with nearly all his “reciprocal” tariffs last week.
On Tuesday, Nvidia announced separately that it planned to build up to $500bn-worth of AI infrastructure in the US over the next four years, as it begins to bolster its presence in American manufacturing. Nvidia designs its chips but outsources production to contractors such as the Taiwan Semiconductor Manufacturing Company.
US officials under the Biden administration first barred Nvidia and other AI chipmakers from selling their most advanced chips to China in October 2022. Chinese officials have since increased their own controls on tools and processors needed to build semiconductors.
