Nvidia faces $5.5b charge as US restricts AI-chip sales to China

CALIFORNIA: Nvidia on Tuesday said it would take $5.5 billion in charges after the US government limited exports of its H20 artificial intelligence chip to China, a key market for one of its most popular chips.

Nvidia’s AI chips have been a key focus of US export controls as US officials have moved to keep the most advanced chips from being sold to China as the US tries to keep ahead in the AI race.

After those controls were implemented, Nvidia began designing chips that would come as close as possible to US limits.

Nvidia shares were down about 6 per cent in after-hours trading.

The H20 is currently Nvidia’s most advanced chip for sale in China and is central to its efforts to stay engaged with China’s booming AI industry.

Chinese companies including Tencent, Alibaba, and TikTok parent ByteDance had been ramping up orders for H20 chips due to booming demand for low-cost AI models from startup DeepSeek, Reuters reported in February.

While the H20 chip is not as fast at training AI models as Nvidia’s chips for sale outside China, it is competitive with some of those chips at a step known as inference, where AI models serve up answers to users.

Inference is fast becoming the biggest part of the AI chip market.

Nvidia CEO Jensen Huang last month argued that Nvidia is well positioned to dominate that shift.

But Nvidia on Tuesday said that the US government is restricting H20 sales to China because of the risk that the chips could be used in a supercomputer.

While the H20 has lower computing capabilities than other Nvidia chips, its ability to connect to memory chips and other computing chips at high speeds is still high.

Those memory and connectivity aspects could make the H20 useful in building supercomputers in China, and the US has placed restrictions on selling chips for use in supercomputers in China since 2022.

The Institute for Progress, a nonpartisan think tank in Washington, DC, on Tuesday argued for restricting the H20 chips, writing that Chinese firms were likely already building such systems.

“At least one of the buyers, Tencent, has already installed H20s in a facility used to train a large model, very likely in breach of existing controls restricting the usage of chips in supercomputers exceeding certain thresholds.” the group wrote.

“DeepSeek’s supercomputer used to train their V3 model is also likely in breach of the same restrictions,” the group added.

On Thursday, a Tencent spokesperson said the Institute for Progress’s conclusions were inaccurate.

“We have not violated any laws and have not built any ‘supercomputers’. Any claim to the contrary is categorically false,” Tencent said in a statement.

The Institute for Progress did not immediately respond to a request for comment on Thursday.

Nvidia said on Tuesday that the US government informed it on April 9 that the H20 chip would require a license to be exported to China and on April 14 told Nvidia those rules would be in place indefinitely.

It is unclear how many, if any, of those licenses the US government might grant.

Nvidia declined to comment beyond its filing. The US Department of Commerce, which oversees U.S. export controls, did not immediately return a request for comment.

The $5.5 billion in charges are associated with H20 products for inventory, purchase commitments and related reserves, Nvidia said.

US agency extends support for cyber vulnerability database

The news comes as Nvidia said on Monday it was planning to build AI servers worth as much as $500 billion in the US over the next four years with help from partners such as TSMC, in step with the Trump administration’s push for local manufacturing.