Nvidia Faces $5.5 Billion Charge from U.S. Export Restrictions
Nvidia Corporation NVDA is set to incur a substantial $5.5 billion charge this quarter due to new U.S. export restrictions. However, a leading analyst maintains that the company’s long-term prospects remain promising.
Recent Developments
On Tuesday, Nvidia announced the significant charge related to a halt in shipments of its H20 graphics processing units to China and other markets. The U.S. government informed Nvidia on April 9 that a license would be required for exporting these chips, prompting the company to adjust its financial outlook.
Following this news, Nvidia’s shares dropped 6.33% in after-hours trading.
Market Analyst Perspective
Dan Ives, an analyst at Wedbush Securities, urged investors to keep the situation in perspective. In a post on X, formerly known as Twitter, Ives expressed, “The Nvidia China restriction news will put pressure on shares, and it’s a concern…BUT this is all part of the high-stakes game between the U.S. and China.”
He further stated, “I am not overly concerned by this news despite the headline. Nvidia remains caught in the tariff spiderweb between the U.S. and China. The Street understands this. Investors need to see beyond this volatile period and recognize that Nvidia is the only chipmaker in the world fueling the AI revolution, which continues to drive demand.”
Significance of Export Mandate
The new export licensing requirement appears to escalate existing trade tensions between the U.S. and China. Recently, President Donald Trump decided against imposing reciprocal tariffs on most nations, while specifically increasing tariffs targeting China. In retaliation, China announced its own tariffs of up to 125% on U.S. goods.
Goldman Sachs previously cautioned that potential decoupling between the U.S. and China could lead to a market sell-off of approximately $2.5 trillion.
Growing Demand for H20 Chips
Earlier this year, reports indicated that Chinese technology giants Tencent Holdings TCEHY, Alibaba Group Holdings BABA, and ByteDance significantly increased their orders for Nvidia’s H20 AI chips, driven by heightened demand for AI computing capabilities, largely propelled by the rise of DeepSeek’s cost-effective AI models.
The DeepSeek R1 AI model, developed for less than $6 million, has reportedly outperformed leading U.S. models, including those from OpenAI.
In March, H3C, a Chinese server manufacturer, flagged potential shortages of Nvidia’s H20 chips, warning that supply arrangements remain uncertain due to various challenges, including raw material policy changes, logistical complications, and manufacturing obstacles.
Current Stock Performance
Nvidia shares have decreased by 18.88% year-to-date but have gained 30.47% over the past year, according to Benzinga Pro data.
As per Benzinga Edge Stock Rankings, Nvidia holds a robust growth score of 94.82%. Click here to compare it with Alibaba, Tencent, and other major market players.
Photo Courtesy: Evolf on Shutterstock.com
Conclusion
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
