The ongoing trade dispute between the US and China escalated further this week, as NVIDIA confirmed it would face a substantial $5.5bn (£4.2bn) financial impact following tighter US export controls on advanced semiconductors.
The chipmaker, which has played a pivotal role in the recent artificial intelligence (AI) surge, disclosed that its H20 AI processor – one of its most sought-after products in China – would now require a licence for export to the country, including Hong Kong. The decision followed official communication from the US government last week, with NVIDIA warning that the licensing requirement would remain in place “for the indefinite future.”
In a statement, the company explained: “The [government] indicated that the licence requirement addresses the risk that the covered products may be used in, or diverted to, a supercomputer in China.”
NVIDIA’s share price reacted sharply, falling almost 6% in after-hours trading following the announcement. The move marked the latest blow to the firm’s operations in China, a key market for its data centre and AI chip portfolio.
Technology tariffs back on the agenda
The fresh export controls emerged amid renewed uncertainty over the future of tariffs applied to technology goods moving between the world’s two largest economies. While a temporary reprieve on certain electronics products remains in effect, comments from US Commerce Secretary Howard Lutnick suggested new, semiconductor-focused duties could be imposed within the next two months.
Currently, 20 categories of technology products, including smartphones, laptops, semiconductor devices, and data processing equipment, benefit from exemptions to both the standard 10% tariff rate applied to most foreign imports and the 125% reciprocal duties introduced against Chinese goods during the previous US administration. These exemptions, originally put in place to shield American technology manufacturers dependent on Chinese production, notably cover items under tariff code 8471, encompassing computers, memory chips, flat panel displays, and semiconductor components.
Market volatility and AI rivalry
The latest restrictions add to a turbulent period for NVIDIA and the wider US technology sector. In January, Chinese AI firm DeepSeek unsettled global stock markets by launching its DeepSeek-R1 AI model, prompting a record-breaking 17% single-day plunge in NVIDIA’s market valuation – a drop equating to $593 billion, the largest one-day loss in corporate history.
The event triggered parallel declines for other major US technology players, including Microsoft, Alphabet, and Meta, highlighting the growing volatility surrounding AI-related competition and US-China trade policy.
With new tariff measures under review and export restrictions tightening, the US semiconductor sector faces an increasingly complex international landscape. Industry stakeholders will be watching closely as policy decisions over the coming months shape access to key Asian markets and influence the trajectory of AI hardware supply chains.
