It’s been a difficult 2025 for Nvidia (NVDA) so far. The company, which had a blockbuster 2024, is beset by challenges that have sent its stock price plummeting. Its most recent setback came Tuesday when it disclosed that the Trump administration will require the company to obtain export licenses to sell its H20 chips to customers in China, effectively banning sales to the country.
The announcement means Nvidia will also book a $5.5 billion charge in the first quarter related to H20 products and purchase commitments. The announcement comes as President Trump is expected to enact tariffs on semiconductors imported from overseas.
The move will also include tariffs on devices like laptops and desktops, which will also impact Nvidia’s consumer and enterprise gaming and graphics chip sales.
Add to that the upcoming AI diffusion export controls that will go into effect in May, which require certain countries to acquire special licenses to gain access to a limited number of AI chips, and Nvidia is clearly battling some powerful headwinds.
And it’s showing up in its stock price. Shares of Nvidia were down 24% year to date as of late Thursday, and more than 6% over the last five days alone.
But there are some bright spots for the company. Its Blackwell chips continue to sell well, and demand will remain strong as tech companies continue to construct data centers to power their AI platforms. But that hasn’t been enough to calm investors’ concerns.
The Trump administration’s export controls on H20 chips to China follow DeepSeek’s revelations that it trained its powerful AI models using below top-of-the-line Nvidia chips. The news set off alarms in Washington, which fears that China could use the technologies to strengthen its position in the global AI race and give its military an edge over that of the US.
Now Nvidia will have to absorb the cost of H20s initially destined for China. That will not only hit Nvidia’s bottom line for Q1, but the year ahead as well. China is Nvidia’s fourth-largest market, accounting for $17.1 billion in sales in the company’s fiscal 2025. The US is its largest market at $61.2 billion, followed by Singapore ($23.6 billion) and Taiwan ($20.5 billion).
It’s worth noting that Nvidia says Singapore accounts for 18% of sales because customers use it to “centralize invoicing” and that its products are almost always shipped to other locations. Singapore itself made up just 2% of sales.
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According to BofA’s Vivek Arya, the H20 restrictions could result in a 5% to 8% cut to Nvidia’s fiscal 2026 sales and a 6% to 10% impact on its earnings per share.
KeyBanc’s John Vinh estimated that H20 sales would account for roughly $12 billion in revenue for Nvidia through its fiscal Q3. And while he said he believes Nvidia was able to ship a meaningful amount of H20s ahead of the ban, the restrictions will negatively impact the company’s revenues.
The ban on H20 chips comes despite Nvidia’s commitment earlier this week to spend $500 billion on AI infrastructure in the US over the next four years, which includes plans to build its Blackwell chips at TSMC’s plants in Arizona.
Beyond the H20 restrictions, Nvidia will soon have to deal with the US’s AI diffusion rules. Put in place by the Biden administration just before he left office, the rules set up a three-tier system comprised of countries that can essentially get unfettered access to powerful AI chips, ones that will need licenses to get a limited number of chips, and those that are fully restricted from receiving chips, including China.
Republican Senators, including Roger Wicker (R-Miss.) and Tommy Tuberville (R-Ala.), sent a letter to Commerce Secretary Howard Lutnick on Wednesday asking him to rescind the AI diffusion order before it goes into effect May 15, saying that it’s overly onerous and could hurt US competitiveness.
Despite the volatility, analysts are still positive on Nvidia’s long-term prospects thanks to its enormous lead in the AI race and powerful CUDA software. What’s more, the United States-Mexico-Canada Agreement (USMCA) insulates Nvidia servers built in Mexico from additional tariffs, which should preserve margins on those products.
“We still believe that overall AI demand from more mainstream customers remains strong, and AI infrastructure in general seems to be more insulated from immediate tariff effects given Mexico USMCA compliance of much of the hardware as well as (presumably) the strategic nature of the industry with substantial US buildouts coming,” Bernstein’s Stacy Rasgon wrote in an investor note.
Still, Nvidia will continue to play a key role in the US’s ongoing tit-for-tat trade war with China. And each new move will shake investors along the way.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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