The current developments in the US-China trade dispute have significant financial consequences for NVIDIA. Due to new export restrictions, the company can no longer deliver its H20 chips specifically developed for the Chinese market, leading to a total write-off of $5.5 billion. This burden results from inventories and previously made purchase commitments that have become worthless due to the trade restrictions.
Impact on Stock Price
The announcement of the export restrictions triggered massive sell-offs:
- Short-term Drops: The stock temporarily lost up to 8.5% in value (as of April 16), while later trading data on April 17 showed a slight recovery to ~93.49 USD (+1.92%).
- Market Reactions: The restrictions not only burden NVIDIA but also other chip manufacturers like AMD and Micron, as well as suppliers like ASML.
Background of the Export Controls
The US government has been tightening export regulations for high technology to China for years – particularly in the area of AI-capable chips. The H20 chips were a stripped-down version of NVIDIA products to comply with previous restrictions. The recent measures indicate a further escalation of the technology conflict.
Long-term Consequences
- Revenue Risk: China is a key market for NVIDIA – its absence could impair long-term growth forecasts.
- Supply Chain Adjustments: The company needs to realign production capacities and distribution strategies.
This situation highlights the vulnerability of global tech companies to the geopolitical tensions between the US and China.