The U.S. chipmaker disclosed on Tuesday that American officials had informed the company on April 9 that its H20 chip would require an export license for sales to China.
Major Chinese cloud companies were still anticipating H20 deliveries by year-end, unaware of the impending restrictions, according to the two sources, who said Nvidia’s China sales team also did not appear to be informed ahead of the public announcement. They spoke on condition of anonymity because of the sensitivity of the matter.
The export controls threaten Nvidia’s business in China, one of its largest markets. Nvidia had secured $18 billion of H20 orders since the start of the year, according to one of the two sources and a third source.
Nvidia shares fell 6% in after-hours trading on Tuesday after it said it would take up to $5.5 billion of charges in the first quarter ending April 27 due to the licensing requirement, which the U.S. government told it on Monday would be indefinite.
Chinese tech giants including, Alibaba and ByteDance, the owner of TikTok, had increased orders for H20 chips amid surging demand for affordable AI models from companies like startup DeepSeek, Reuters reported in February.
Shares in Alibaba fell 4.1% and Tencent dropped 1.8% in Hong Kong trading on Wednesday.
Washington has banned exports of Nvidia’s most advanced chips to China since 2022, concerned that advanced technologies could be used by China to build up its military capabilities.
“By restricting the H20 system, U.S. regulators are effectively pushing Nvidia’s Chinese customers toward Huawei’s AI chips,“ said Nori Chiou, investment director at Singapore-based White Oak Capital Partners.
“Huawei’s chip design and software capabilities are likely to advance quickly as it gains more customers and development experience,“ Chiou added.
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