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The visit by Huang can be seen as an effort to stabilise Nvidia’s business in China despite the latest curbs. In line with this, ETtech takes a deeper look at the case and its impact on tech stocks.
What’s happening?
On April 14, the US government informed Nvidia that its H20 AI chips would require special export licenses to be sold to China. The following day, Nvidia confirmed the development in a stock market filing, warning that the new rules could significantly impact revenue as the H20 chips accounted for 13% of sales in fiscal 2024.
Nvidia is a US-based tech company that manufactures advanced computing chips, especially graphics processing units (GPUs) which are used in a range of sectors including artificial intelligence (AI), data centers, and supercomputers, among others.
This marks the third time since October 2022 — when Joe Biden was in the White House — that the US Commerce Department’s Bureau of Industry and Security (BIS) has imposed limits on the capabilities of AI chips exported to China.
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What are the US curbs on sales to China?The US has tightened restrictions on Nvidia’s H20 AI chips over fears they could still boost China’s AI capabilities, despite being designed to comply with earlier export controls.
While export of more powerful chips like Nvidia’s H100 to China were already banned, the rise of Chinese AI firms like DeepSeek — which claims ChatGPT-like performance using less advanced hardware — has raised new concerns in Washington.
Demand for the H20 from Chinese tech giants like Tencent, Alibaba, and ByteDance has surged, but without a grace period for the new rules, Nvidia expects a $5.5 billion loss from unfulfilled orders.
The H20 chips — a modified, lower-powered version of Nvidia’s high-end H100 — were developed to meet earlier US export rules introduced in October 2023. Those regulations banned the sale of cutting-edge AI hardware to China, pushing Nvidia to adjust its offerings in order to maintain a foothold in the crucial Chinese market.
Why does it matter?
Until now, Nvidia’s H20 chip was central to China’s AI push, powering DeepSeek’s low-cost ChatGPT rival, R1. Its release shocked the global tech industry and sparked a wave of AI investments across China.
Even though the H20 chip was designed to bypass US export bans, it’s far less powerful than Nvidia’s top chip, the H100. Specifically, it has only 14% of the compute throughput of the H100, but good enough for China’s current needs.
However, the less powerful chip like the H20 is still enabling major AI developments in China, leading to rising concerns in the US. According to a report by BBC, the move may push China to accelerate domestic chip development, though the US curbs are unlikely to significantly stall its AI ambitions.
How does China react to this?
The impact of US export restrictions is already visible in China. As of late March, Chinese server maker H3C reported shortages of Nvidia’s H20 processors, which are now nearly sold out. Key Chinese tech giants like Alibaba, Tencent, and ByteDance, who depend on Nvidia’s AI chips, are also expected to face disruptions.
The new US export restrictions could cost Nvidia up to $15 billion annually in lost sales, on top of $5.5 billion in special charges already anticipated. These losses are creating an opening for Chinese AI chipmakers like Huawei, Cambricon, and H3C, which are rapidly working on homegrown alternatives.
Chinese AI firm DeepSeek is already using Huawei’s Ascend 910C processor, which is now seen as China’s most advanced domestic rival to Nvidia’s chips. While partially state-owned Cambricon, founded in 2016, is smaller, its stock has surged nearly fivefold in a year, reflecting strong investor confidence. Huawei, meanwhile, remains privately held.
What’s the long-term impact?
The US export restrictions are shaking up the semiconductor market, and Nvidia and AMD are feeling the brunt of it, with their stocks tumbling as investors react to the uncertainty. This coincides with global uncertainty sparked by the Trump tariffs.
Some analysts believe Nvidia can absorb the financial hit from US export restrictions due to its size, but the strategic damage is more serious. The new rules make it much harder for Nvidia to sell in China — a key market for AI chips.
Analysts from Bank of America and Morgan Stanley caution that the new rules, particularly those governing AI diffusion set to take effect in May, could broaden the impact to a larger range of tech firms. These expanding limitations might restrict US companies from obtaining licenses to sell AI-related products to China and other countries.
Also Read: Analysts warn US could be handing chip market to China
Apart from Nvidia’s expected $5.5-billion impact, other US chip equipment makers could see a hit of about $1 billion yearly due to the levies. Chipmaker Advanced Micro Devices (AMD) also reported it expects to take an $800 million loss due to the US government’s new restrictions on sales to China, as noted by ET.
The World Trade Organization (WTO) has also cut its global trade growth forecast for 2025 to 2.2%, citing mounting trade barriers like US tariffs and tech restrictions.
There’s also a wider concern that these restrictions could speed up China’s push to build its own advanced chips. Companies like Huawei and Cambricon are already working to reduce their reliance on US technology, and while their products still trail in software, they’re catching up fast.
China’s imports of US services have grown significantly, reaching $55 billion in 2024, contributing to a $32 billion US services trade surplus. Now, Beijing is threatening to cut back, notably by reducing imports of US films and discouraging Chinese citizens from traveling to or studying in the US.
Tech stocks take a hit
A day before Huang’s Beijing visit, Nvidia shares dropped 6.87% on Wednesday, following a sharp decline in premarket trading. The tech-heavy Nasdaq Composite declined 3%, driven largely by the fall in Nvidia shares. Before markets closed for the long Easter weekend, Nvidia stocks were down 2.93%, while the Nasdaq Composite was down 0.13% at the end of trade on Thursday.
These movements reflect investor concerns about the long-term impact of the trade restrictions on global tech and AI growth
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