Here are the details on Nvidia Corporation’s big $5.5 billion charge. Much of that is attributed to the export of its H20 AI chip to China and elsewhere. Aspects of the U.S. government’s licensing requirements for the H20 chip have imposed an enormous economic burden. This new chip was explicitly designed to work within the limitations of U.S. export controls.
Nvidia’s current generation of AI chips, known as Blackwell, features the H20 chip. It was developed specifically to meet the needs of regulatory compliance in the U.S. It’s designed to compete with the performance of Nvidia’s top-of-the-line H100 and H200 AI chips that are shipped to the U.S. and other markets. On the downside, it has much slower interconnection speeds and far lower bandwidth capabilities. This design decision reflects Nvidia’s strategy to adapt its technology for compliance while still catering to demand in the Chinese market.
In 2024 alone, revenues from the H20 chip are projected to reach $12 billion to $15 billion. For Nvidia—especially in China, the company’s fourth-largest market by sales—this makes it a critical product. It’s already creating a stir in joint research programs at DeepSeek, a Chinese startup. Most notably, they just announced their competitive AI model, R1. The H20 chip’s poor rollout is a massive revenue down the drain. It is at the very center of driving China’s AI technologies forward.
The U.S. government requires a license for the export of the H20 chip to China and other select countries. This license renewal requirement shall remain in effect, “for the far distant future.” Long-term, Nvidia may have regulatory hurdles to clear as it continues to internationalize its business. Nvidia is preparing for over $400 million in quarterly losses from the economic effects of these restrictive rules. The company is still deeply invested in bringing new competition to this important marketplace.
Regardless of the limitations, the H20 chip is an important piece of Nvidia’s booming sales game. Of its sales for the past fiscal year, the company claims 53% of sales went to U.S. businesses. This fiscal year ended in January. Nvidia’s AI monopoly, including the new H20 chip, rolls on. This continued success showcases the power of Nvidia’s ability to remain a key force of the tech industry’s rapid evolution.
However, looking forward, Nvidia will need to walk a line between ensuring compliance with U.S. restrictions and encouraging development in markets outside the U.S., including in China. International Trade Export restrictions create enormous hurdles for businesses. They will certainly inform future product development and go to market strategies as companies respond to a new, more complex regulatory landscape.
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