Nvidia’s China dream collapses; stock falls 6% after $5.5 billion charge linked to China AI chip export ban

The U.S. has just cut off one of Nvidia’s fastest-growing markets, triggering billions in fallout. The export crackdown may have ended the company’s biggest bet outside America.

Nvidia said Tuesday it will take a $5.5 billion charge this quarter after new U.S. export rules forced the company to hit pause on sales of its H20 AI chips to China and other regions. Investors didn’t take the news lightly — the stock fell 6% in after-hours trading.

Nvidia’s AI Chip Sales to China Slammed by New U.S. Restrictions

The company disclosed in an SEC filing that, as of April 9, the U.S. government now requires a license to export H20 chips to China and a few other countries. That restriction appears to be indefinite.

“On April 9, 2025, the U.S. government, or USG, informed NVIDIA Corporation, or the Company, that the USG requires a license for export to China (including Hong Kong and Macau) and D:5 countries, or to companies headquartered or with an ultimate parent therein, of the Company’s H20 integrated circuits and any other circuits achieving the H20’s memory bandwidth, interconnect bandwidth, or combination thereof,” Nvidia said in the filing.

The chip giant added, “The USG indicated that the license requirement addresses the risk that the covered products may be used in, or diverted to, a supercomputer in China. On April 14, 2025, the USG informed the Company that the license requirement will be in effect for the indefinite future.”

“The Company’s first quarter of fiscal year 2026 ends on April 27, 2025. First quarter results are expected to include up to approximately $5.5 billion of charges associated with H20 products for inventory, purchase commitments, and related reserves,” Nvidia stated.

This is the clearest sign yet that Nvidia’s breakneck growth could slow under tightening U.S. controls. Washington has been steadily clamping down on AI chip exports since 2022, with the aim of keeping powerful hardware out of Chinese military programs. The H20 chip was Nvidia’s workaround — a China-focused version that was stripped down just enough to comply with earlier restrictions. It still ended up pulling in an estimated $12–$15 billion in 2024.

But that workaround seems to be over.

Nvidia CEO Jensen Huang said during February’s earnings call that sales to China had already been cut in half from their levels before the restrictions. He added that local competition is heating up. Huawei — once a non-issue — has now made it onto Nvidia’s annual list of competitors for the second year in a row.

China is Nvidia’s fourth-largest market after the U.S., Singapore, and Taiwan. The company said in its latest annual report that 53% of total sales still go to U.S.-based buyers.

“China is Nvidia’s fourth-largest region by sales, after the U.S., Singapore, and Taiwan, according to Nvidia’s annual report. 53% of its sales went to U.S. companies in its fiscal year that ended in January,” CNBC reported.

The H20 chip is similar to Nvidia’s high-end H100 and H200 models sold elsewhere, but it lags in bandwidth and interconnect speed. It’s built on the Hopper architecture Nvidia released back in 2022. The company has since shifted focus to its latest chips, based on the new Blackwell platform.

NVIDIA Blackwell

Still, the H20 mattered. It powered research by DeepSeek, the Chinese AI company behind the R1 model that shook up the AI scene earlier this year.

And things may tighten further. Starting next month, Nvidia will have to deal with new export restrictions tied to what the U.S. calls “AI diffusion rules.” The company has warned that policies like these could hurt U.S. leadership in technology and weaken competition globally.

To keep up with the shifting rules, Nvidia has already moved parts of its operations — like testing and distribution — out of China.

At Nvidia’s developer conference in March, Huang was asked directly about the China restrictions. His response? “We comply with the law.” But he also made a point to say that half of the world’s AI researchers are Chinese, and many of them work in U.S. labs.

The company is scheduled to report fiscal Q1 earnings on May 28. There’s a good chance this issue will dominate the call.