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Nvidia is facing a $5.5 billion financial hit after the US government imposed new export restrictions on its H20 HGX AI GPUs designed for the Chinese market. The decision came into effect on April 9, 2025, with a notification from the US government stating that a license is required to export H20 GPUs to China, Hong Kong, Macau, and other D:5 countries. The restrictions were confirmed to remain in effect indefinitely on April 14.
The US government cited the H20 GPUs’ memory bandwidth, interconnect bandwidth, and their potential use in supercomputers as the main reasons for the restrictions. Concerns that these GPUs could be used in supercomputers in China prompted the license requirement. The decision was a significant financial setback for Nvidia, as the company was unable to sell its H20 inventory.
Nvidia’s H20 HGX is a modified version of the H100 processor, designed to comply with the US restrictions on GPU exports to China in 2022. The AI and HPC performance of the H20 is significantly reduced compared to the H100, especially not up to par with supercomputer workloads that require FP64 compute precision. However, with 96GB of HBM3 memory and 4 TB/s of bandwidth, the H20 can deliver a competitive edge in AI workloads.
The H20 HGX GPUs have seen tremendous demand in China. Tech giants such as Alibaba, ByteDance, and Tencent have built large-scale AI training and inference clusters with these GPUs. According to reports, Chinese companies spent $16 billion on these GPUs in the first quarter of 2025, increasing orders even before the US sanctions took effect.
As a result of these sanctions, Nvidia will take a $5.5 billion charge in the first quarter of fiscal 2026, ending April 27, 2025. These charges are related to inventory, purchase commitments, and related reserves for H20 products. This financial loss will have a significant impact on the company's earnings.
Nvidia CEO Jensen Huang reportedly attended a $1 million dinner with US President Trump to try to avoid these sanctions. However, these efforts failed, and the Trump administration decided to limit sales of H20 and similar processors starting in April. This decision severely damaged Nvidia's dependence on the Chinese market.
Nvidia is not the only one affected by these sanctions. The US Commerce Department has also restricted exports of AMD's Instinct MI308 GPUs to 10 countries in China. However, since AMD lags significantly behind Nvidia in the AI GPU market, these restrictions are likely to have little impact on AMD’s business.
These restrictions will also have an impact on China’s tech industry. Companies like Alibaba and Tencent, which rely on H20 GPUs, will have to look for alternatives for their AI clusters. This may temporarily slow China’s AI development pace, but in the long run, it could boost domestic GPU development.
These restrictions mark a new chapter in the US-China tech competition. By tightening control over high-performance computing technologies, the US is trying to limit China’s supercomputing capabilities. However, these measures will put financial pressure on US companies like Nvidia, which highlights the complexity in global tech supply chains.
Overall, while these export restrictions may hurt Nvidia’s financial position, they represent long-term changes in the global AI and supercomputing landscape. Nvidia will have to adjust its strategy, while China may focus on developing domestic alternatives, which could further exacerbate geopolitical tensions in the tech industry.