Nvidia (NVDA) Braces for $5.5 Billion Write-Down as China Chip Curbs Take Hold

Nvidia (NVDA, Financials) is preparing to report quarterly earnings on Wednesday, May 28, with investor focus centered on the fallout from new U.S. export restrictions targeting the company's H20 chip. The AI-focused chipmaker announced a $5.5 billion inventory write-down for the China-specific H20, which analysts at BNP Paribas estimate could translate into a $15 billion revenue hit over the next 12 months. The write-down is being called the largest in semiconductor industry history.

For the quarter ending in April, analysts expect Nvidia to post revenue of $43.28 billion, up 66% year over year. While this still dwarfs growth among other megacap tech peers, it marks a significant deceleration from the more than 250% growth recorded during the same period last year. Full-year growth is projected at 53%, indicating a cooling trajectory despite Nvidia's dominant position in AI chip sales.

The H20 chip was designed to meet earlier U.S. export restrictions under the Biden administration, but a new directive from the Trump administration issued on April 9 imposed tighter licensing requirements. Reports suggest Nvidia's leadership was surprised by the move, having believed the chip would be permitted for export. CEO Jensen Huang recently disclosed that Nvidia's market share of GPUs in China has fallen from 95% to 50% under the new restrictions. In fiscal 2024, Nvidia recorded $17.1 billion in revenue from customers with Chinese addresses, including those in Hong Kong.

Huang has argued that continued export curbs risk encouraging China to accelerate development of its own AI chips, which could eventually undercut U.S. dominance in advanced semiconductor technologies. Nvidia shares have risen about 1% year to date, modestly outperforming the Nasdaq Composite Index, which is down roughly 1% in the same period.

Earlier in May, the Trump administration rescinded the proposed AI diffusion rule, a move seen as a temporary win for Nvidia and rival Advanced Micro Devices. However, regulators signaled they would soon introduce a simpler, replacement rule, keeping pressure on AI chip exports. Nvidia is lobbying for export licenses for the H20, but analysts at Morgan Stanley believe it's unlikely the company will provide any meaningful update during this earnings call.

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