Donald Trump’s trade war: How new US restrictions on chip exports could cost Nvidia billions

The Donald Trump-led United States government's decision to impose new licensing requirements for chips exported to China could cost semiconductor giants such as Nvidia and Advanced Micro Devices Inc. (AMD) billions, according to reports.

Nvidia's H20 chips, AMD's MI308 artificial intelligence (AI) chips, and other equivalent products are likely to be severely impacted once the US Commerce Department formally issues its notice.

Speaking to Reuters, a spokesperson said the US Commerce Department is “committed to acting on the President’s directive to safeguard our national and economic security”.

How Much Will This Cost Nvidia?

The Trump administration's policy change could cost Nvidia “billions of dollars” on a product that was designed to comply with older restrictions, according to a Bloomberg report.

In its filing with the exchanges, Nvidia on April 15 said that if implemented the move would cost the AI chip maker over $5.5 billion in charges — largely from limits placed on its H20 AI chip exports to China.

As per the filing, the US government informed Nvidia of the development on April 14. 

A representative for the White House didn’t immediately respond to Bloomberg's request for comment.

What Are the Changes in Policy?

• Nvidia's H20 chips would require a license to export to China “for the indefinite future”, officials told the company, as per the filing.
• The new rules are aimed at concerns that “the covered products may be used in, or diverted to, a supercomputer in China”, it added.
• As per Nvidia, it would have to report around $5.5 billion in writedowns during Q1 from “inventory, purchase commitments and related reserves” tied to the H20 line.
• Nvidia Shares Down: The tech darling's stock slipped by around 6 per cent in late trading on April 15 after its filing hit the news.

Nvidia Warns China Will Develop Independent Tech

On the restrictions, Nvidia has warned that any more push and restrictions would only make China determined to develop technology independent of the US and provide competition for American companies. 

In October 2022 too, the US government under Joe Biden, barred US makers from selling their most advanced products to China over security concerns and amid increased AI advancement and applications.

The latest rules for Nvidia are a sign that the Trump administration will stay the course on the US government’s approach to Chinese tech development. They follow earlier sanctions on dozens of Chinese firms that Trump officials allege are aiding Beijing’s military tech efforts.

(With inputs from Agencies)