Fresh semiconductor export curbs on China show “Nvidia is a big chip on the table for Trump” in trade war
Shares of Nvidia are down more than 6% in premarket trading.
Nvidia is down 6.5% premarket after warning it will take a $5.5 billion charge in its upcoming earnings report in light of the US government cracking down on sales of its H20 chip to China. The VanEck Semiconductor ETF is likewise down 3.8% this morning.
This announcement comes following a host of chip restrictions on China enacted during the Biden administration and amid a trade war that’s become more narrowly focused on China, with the Trump administration slapping 145% tariffs on its imports and China putting a 125% tariff on US imports in response.
“The Trump Administration knows there is one chip and company fueling the AI Revolution and it’s Nvidia... and put a ‘Do Not Enter’ sign in front of China for Nvidia and Jensen with this restriction,” Wedbush Securities analyst Dan Ives wrote. “Nvidia is a big chip on the table for Trump in our view.”
Sales to China (based on the customer’s billing location) have been waning as a share of the company’s total revenues, to 13% in 2024 from 17% in 2023. Per Reuters, citing sources familiar, Nvidia had secured $18 billion in H20 orders since the start of the year, or a little less than 9% of expected revenues for its current fiscal year.
But chip smuggling and disguising the final destination of Nvidia’s high-power chips have become an international concern, particularly following the emergence of DeepSeek. That’s led to investigations from the FBI, the White House, and the authorities in Singapore. From 2023 to 2024, Singapore’s share of sales increased from 11% to 18%.
“The Street will take this news with clear nervousness, worried these are the first shots fired in the tech battle between the US and China and Beijing/Xi are not just going to take this news and walk away,” Ives added.
Worries about additional export curbs have clearly been on management’s radar.
“Given the increasing strategic importance of AI and rising geopolitical tensions, the US government has changed and may again change the export control rules at any time and further subject a wider range of our products to export restrictions and licensing requirements, negatively impacting our business and financial results,” per the company’s annual report released in February. “In the event of such change, we may be unable to sell our inventory of such products and may be unable to develop replacement products not subject to the licensing requirements, effectively excluding us from all or part of the China market.”
Kind of seems like there are two bumpy paths for chip companies at the moment: if you make high-powered products outside the US that China wants, the US doesn’t want you to sell those to them. And if your fabs are in the US, you’re facing higher tariffs denting demand for anything China does want.
