Nvidia (NVDA, Financial) is facing new U.S. export restrictions that effectively halt sales of its H20 AI chips to China, a move analysts see as a strategic escalation in the ongoing trade standoff between Washington and Beijing. The restriction requires an indefinite license, signaling what Wedbush called a “clear shot across the bow” from the U.S. to China.
Nvidia shares dropped north of 6% in premarket trading on the news.
The policy change takes effect immediately, just weeks before the quarter closes, prompting concerns over inventory and sales impact. Nvidia is expected to write down $5.5 billion in inventory, which could have translated to more than $12 billion in revenue at gross margins near 60%, according to Morgan Stanley's Joseph Moore. He noted the lack of optimism around receiving necessary licenses suggests deeper disruptions ahead.
While not a complete ban, the licensing requirement sends a strong message. The decision coincides with China appointing a new trade negotiator, Li Chenggang, replacing Wang Shouwen.
Despite recent Nvidia announcements pledging $500 billion in U.S. investments over four years, analysts say this development reinforces the deepening trade divide. More policy actions from both countries are expected before negotiations possibly resume.
