Nvidia’s fiscal first quarter earnings report will not post until May 28, but one thing we know already about the company’s Q1 performance is that it likely will be weighed down by a $5.5 billion burden related to US export controls against China and the increasingly intense trade war between the two nations.
In a development that seemed to catch market observers by surprise, Nvidia acknowledged in an 8-K filing with the Securities and Exchange Commission on April 15 that the US government (referred to as USG in the filing) “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.”
The filing 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.
As a result, the filing went on, the earnings report for Nvidia’s fiscal Q1 period, which ends on April 27, is expected “to include up to approximately $5.5 billion of charges associated with H20 products for inventory, purchase commitments, and related reserves.”
The H20 is the Hopper-related chip that Nvidia redesigned to get around an earlier set of China sanctions imposed by the Biden Administration.
AMD followed Nvidia’s filing by acknowledging that it could see an $800 million punch in the gut due to the new licensing requirement, according to several published reports.
The Nvidia filing immediately caused the company’s stock price to plummet by more than 7% as of mid-day on April 16, and along with the AMD news, the entire semiconductor sector was in a rapid retreat. This slide came just a few days after the chips sector seemed buoyed by reports that some chips could be exempt from the Trump Administration’s tariff policies, and then almost immediately troubled again by reports of new tariff-related probes into the industry.
Jack Gold, president and principal analyst at J. Gold Associates, noted in an email to Fierce Electronics how massive disheartening this turn of event could be for the whole US semiconductor ecosystem.
“I’m not surprised about the write down at Nvidia,” he said. “China is a substantial portion of their sales [$17 billion in fiscal 2025, or about 13% of Nvidia’s total revenue, down from 21% in fiscal year 2023]. If they can’t sell to China, even with a technology-restricted chip like the H20, then they will definitely feel the pain in revenues. And it will give Huawei (and others) a big boost in selling their own increasingly competitive chips. So it’s really a double whammy for the US chip industry as sales go down and local supply takes over, and likely never to recover for US chip makers once the locals are successful. And if they succeed in gaining market share locally, they will definitely start aggressively competing in the rest of the world. That will have an outsized effect on Nvidia and other chip makers.”
Of course, the second Trump Administration, somehow not even three months old yet, has been a rollercoaster ride with every steep drop seemingly followed by at least a brief climb. Could the most recent negative turn of events shift again toward hope if Nvidia and AMD are able to get the new government license?
“Will all of this change again? It may,” Gold acknowledged. “There is no real way to know what’s next with the current administration. Could Nvidia get a license? If I was a betting man, I’d say probably as there is a huge cost to the US chip industry if it doesn’t. But that’s certainly not a sure thing.”