Nvidia shares were down almost 7% by 10:52 a.m. ET today after the company revealed a major financial hit in its latest filing. The tech giant announced it will take a $5.5 billion charge in the first quarter of fiscal 2026 following new U.S. export rules.
Why Nvidia Is Taking a $5.5 Billion Blow
The U.S. government has informed Nvidia that it now needs a license to export certain chips to China and other regions. This includes the company’s H20 chips, which were specifically designed to meet earlier export rules. The license is required for sales in China, Hong Kong, and Macao and it will be in "effect for the indefinite future" to block tech that could help China build a supercomputer. Nvidia says the $5.5 billion charge reflects inventory, purchase agreements, and reserves related to the H20 chips.
A Strategic Blow Beyond Business Losses
This move extends efforts first introduced by the Biden administration to limit China’s access to advanced AI technology. Ironically, Nvidia created the H20 chips to meet those earlier restrictions.
These chips generated $12 billion to $15 billion in revenue in 2024. But things got tricky when a Chinese company, DeepSeek reportedly used them to build a ChatGPT-style chatbot at much lower costs.
What Analysts Are Saying
Tech analyst Dan Ives from Wedbush commented on X, saying:
"get used to this news flow in US/China tariff battle but it's a game of high stakes poker and need to buckle seat belt. Look past the chaos. Nvidia the only AI chip in the world ... demand not the issue."
Still, he admits Nvidia will face serious challenges selling in China moving forward.
Not Just a Short-Term Setback
The license requirement seems tied to long-standing U.S.China trade tensions, not just recent policy shifts. And since both Republican and Democratic administrations support these controls, there’s no clear end in sight.
Nvidia stock is now trading at 23 times forward earnings, which is on the lower end of its five-year range. Many analysts still believe Nvidia holds a strong edge in the AI market, making it a potential opportunity for long-term investors.
Disclaimer
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About the Author
Rabia Tayyab is a technical writer at TECHi who specializes in simplifying complex topics and delivering accessible content. She balances precision and creativity to meet the needs of both technical and general audiences.
