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For a company worth nearly $3 trillion, facing an unexpected cost of a few billion dollars may sound relatively paltry. But U.S. chipmaker Nvidia’s announcement in a regulatory filing earlier this month that it expected to incur costs of up to $5.5 billion as a result of new U.S. export controls sent the company’s stock tumbling more than 6 percent the following day and caused a collective shiver throughout the semiconductor chip industry.

Nvidia’s hefty financial hit comes from a new Trump administration rule requiring the company to acquire a special license to sell its H20 chips in China, adding another hurdle in accessing one of the world’s biggest tech markets and the United States’ foremost competitor in the race for artificial intelligence.

For a company worth nearly $3 trillion, facing an unexpected cost of a few billion dollars may sound relatively paltry. But U.S. chipmaker Nvidia’s announcement in a regulatory filing earlier this month that it expected to incur costs of up to $5.5 billion as a result of new U.S. export controls sent the company’s stock tumbling more than 6 percent the following day and caused a collective shiver throughout the semiconductor chip industry.

Nvidia’s hefty financial hit comes from a new Trump administration rule requiring the company to acquire a special license to sell its H20 chips in China, adding another hurdle in accessing one of the world’s biggest tech markets and the United States’ foremost competitor in the race for artificial intelligence.

The Trump administration has said that the new license requirement is intended to prevent the chips from being “used in, or diverted to, a supercomputer in China,” according to Nvidia’s filing. It’s the latest attempt by the United States to slow China’s AI development and preserve the United States’ advantage.

The perennial question hanging over U.S. restrictions on Chinese tech over the past eight years has been how well they are actually working. Significant milestones in China this year—such as the launch of the advanced AI model DeepSeek-R1 and advances in semiconductor chips from tech giant Huawei—have reignited that debate.

Some experts and policymakers are now questioning whether it’s too late to keep China from catching up to U.S. AI technology, and whether the United States should instead pursue a more collaborative approach with Beijing on AI development and regulation.

Jensen Huang, the head of the chip company Nvidia, displays some of the company’s graphics cards at the developer conference GTC in San Jose, California, on March 18.Andrej Sokolow/dpa/Reuters

Nvidia created the H20 as a workaround for U.S. government restrictions on another one of its chips—the H800, which the Biden administration banned the company from selling to China in October 2023. The H800 had also been created in response to earlier restrictions by the Biden administration on Nvidia’s sales.

Now, Trump has moved the goalposts again.

“The first round of chip controls came and they set this bar, and then Nvidia said: ‘OK, we’ll build the fanciest thing we can that’s allowed, and sell a bunch of them, because we’ve just been told we could sell those’—and then a bunch of people in Washington were angry, as if this was a sort of unpatriotic thing to do,” said Graham Webster, a research scholar at Stanford University who focuses on China’s tech policy. “I think [Nvidia’s] orientation is pretty consistent—build increasingly advanced chips and sell as many as they can to whoever they can get them to,” he said.

Nvidia’s graphics processing units (GPUs)—a type of semiconductor circuit that the company invented in 1999—have exploded in popularity recently because of their critical role in training artificial intelligence models such as OpenAI’s ChatGPT and its competitors. They have also made the company’s products a prime target of export controls by successive U.S. administrations intent on curbing China’s access to advanced technology.

Trump’s first administration began that effort, restricting Huawei from access to semiconductor chips and other U.S. technology by placing the company (and other Chinese firms) on the Commerce Department’s so-called “entity........

© Foreign Policy