Shares in Nvidia took a significant dive on Wednesday after the computer chip powerhouse announced it would incur $5.5 billion (£4.2 billion) in costs due to tightened US export restrictions on technology going to China.
Nvidia, a key player in the artificial intelligence (AI) boom, has been informed that it will now need licenses to export its popular H20 AI chip to China, including Hong Kong.
These regulations are a part of an escalating trade conflict between the US and China, with both nations imposing heavy tariffs on a variety of goods.
Consequently, Nvidia’s shares fell close to 7% on Wednesday, while the Nasdaq exchange, where it is listed, ended the day down by 3.1%.
On Tuesday, the company revealed that federal officials had communicated last week that a permit is required for selling the H20 chip to China.
Nvidia stated that this license mandate “will be in effect for the indefinite future” and serves to mitigate risks concerning the potential use of their products in Chinese supercomputers.
When approached for further comment by the BBC, the company remained tight-lipped.
Industry expert Marc Einstein noted that the estimated $5.5 billion impact aligns with his projections, but emphasized that Nvidia is likely in a position to absorb this financial burden.
He also remarked that this situation could merely be a strategic negotiating maneuver, suggesting the possibility of future exemptions to tariff policies, as these restrictions affect not just Nvidia, but the entire US semiconductor landscape.
Vocabulary List:
- Significant /sɪɡˈnɪfɪkənt/ (adjective): Of considerable importance size or worth.
- Incurs /ɪnˈkɜːrz/ (verb): To bring upon oneself; to become liable to.
- Regulations /ˌrɛɡjʊˈleɪʃənz/ (noun): Rules or directives made and maintained by an authority.
- Mitigate /ˈmɪtɪɡeɪt/ (verb): To make less severe serious or painful.
- Burden /ˈbɜr.dən/ (noun): A load typically a heavy one; a source of stress or worry.
- Tariffs /ˈtærɪfs/ (noun): Taxes imposed by a government on imported goods.
How much do you know?
