Nvidia finds itself at a crossroads, confronting $5.5 billion in losses following the U.S. government’s mandate for export licenses to sell its H20 chip in China.
Despite these setbacks, Nvidia reiterated its commitment to adhering strictly to government directives, affirming compliance with all regulations regarding international sales of its AI processors.
This statement came in response to inquiries from a House Select Committee probing national security concerns associated with Nvidia’s sales practices.
The controversial H20 chip, designed after AI export restrictions were implemented in 2022, was meant to align with these stringent U.S. trade controls. Unfortunately, Nvidia’s shares plummeted nearly 7% after the news broke.
Nvidia’s market dominance in AI chip applications puts it in a precarious position, particularly after some of its chips were allegedly utilized by China-based DeepSeek to develop the disruptive R1 model earlier this year.
In a defensive maneuver, Nvidia highlighted its significant contributions to the U.S. economy. The company emphasized its role in boosting national security by fostering job creation, sustaining technological leadership, and contributing billions in tax revenue, which directly addresses trade imbalances.
The predicament for Nvidia lies in the newly deemed “loophole” in H20 exports, previously compliant with Biden administration guidelines. The House Select Committee now labels those outgoing shipments to China as having exploited regulatory gaps.
However, Nvidia maintains that it follows government instructions regarding international sales, entrusted with the task to support U.S. interests globally.
Furthermore, investigations are underway to determine whether restricted chip exports reached China via Singapore, which has become Nvidia’s second-largest market based on its fiscal filings.
On this matter, Nvidia clarified that revenues associated with Singapore are often for transactions with U.S. subsidiaries, with products typically rerouted to locations like the U.S. and Taiwan.
Besides navigating current export constraints and a congressional inquiry, Nvidia faces impending new export limitations tied to “AI diffusion rules.” Introduced by the Biden administration, these upcoming guidelines could impose additional constraints on the company’s sales operations, starting next month.
