Nvidia Corporation, as revealed just yesterday, is going to take a whopping $5.5 billion bath on all this. This fee has to do with the export of its H20 graphics processing units (GPUs) to China and other parts of the world. Nvidia took this decision after repeated tightening of U.S. government controls. Now, they require a government license to export advanced AI chips, like the H20, which was specifically built to navigate these export restrictions.
In its recent annual filing, Nvidia listed Huawei as a competitor for the second consecutive year, highlighting the increasing competition it faces in the global market. The U.S. government originally imposed restrictions on AI chip exports in 2022 during the Biden administration, setting the stage for ongoing regulatory scrutiny. In 2023, officials amended the regulations to block the sale of sophisticated generative AI processors. This decisive step increased the chokehold on technology exports.
These restrictions have huge consequences for Nvidia. So far in 2024, the company has brought in as much as $12 billion to $15 billion on H20 chips alone. As Nvidia’s CEO, Jensen Huang, recently noted, revenue from China has fallen to a quarter of its level before the export controls took effect. This dramatic drop largely indicates the economic burden these regulations have created.
American officials have placed the H20 chip on the Commerce Department’s most sensitive export control list. They point to its potential military applications, like using it to construct next-generation supercomputers used in defense. To meet U.S. requirements, the H20 chip was purposely created to fall in line with U.S. regulations. Compared to Nvidia’s new H100 and H200 interconnection speeds and bandwidth, it comes up short. Those chips are all the rage in America and beyond.
Chinese deep-tech firm DeepSeek has leveraged H20 chips in its research. Most recently, they announced a narrow, competitive AI model – R1. This development underscores the ongoing advancements in AI technology within China and illustrates how foreign companies leverage Nvidia’s products despite existing restrictions.
In written comments earlier this summer, Nvidia suggested that these new export controls would hurt competition and jeopardize U.S. leadership in AI technology. The tech giant’s position exemplifies a growing trend among tech companies. These experts express concern over the impact of regulatory action on competitive innovation and market dynamics in the long term.
China is such a core market for Nvidia that it’s almost an unthinkable scenario. It’s currently the company’s fourth-largest region for sales, behind the United States, Singapore, and Taiwan. Despite facing challenges due to export controls, Nvidia continues to navigate this complex landscape as it seeks to balance compliance with competitive pressures.