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Nvidia could be hit hard by the new chip export license. Analysts warn the big decision is still to come.
NVDANvidia(NVDA) Business Insider·2025-04-16 20:48

Core Viewpoint - Nvidia faces significant regulatory challenges due to new licensing requirements imposed by the Trump administration for exporting accelerated chips to China and other select countries, leading to a potential inventory charge of up to 5.5billion[1][2].Group1:RegulatoryImpact−ThenewrulesregardingNvidia′sChinesebusinesshavebeendescribedbyanalystsas"disruptive"and"abrupt,"indicatingamajorshiftintheregulatorylandscape[1].−UBSanalystscharacterizedthenewlicensingrequirementaseffectivelyaban,suggestingasevereimpactonNvidia′soperationsinChina[2].−Analystsexpectthatthelicensingprocesswillbelengthy,whichwilllimitrevenuefromNvidia′sH20chipdesignedfortheChinesemarket[3].Group2:FinancialImplications−Nvidiaanticipatesachargeofupto5.5 billion [1][2]. Group 1: Regulatory Impact - The new rules regarding Nvidia's Chinese business have been described by analysts as "disruptive" and "abrupt," indicating a major shift in the regulatory landscape [1]. - UBS analysts characterized the new licensing requirement as effectively a ban, suggesting a severe impact on Nvidia's operations in China [2]. - Analysts expect that the licensing process will be lengthy, which will limit revenue from Nvidia's H20 chip designed for the Chinese market [3]. Group 2: Financial Implications - Nvidia anticipates a charge of up to 5.5 billion in inventory and reserves for the first quarter ending April 27, which could affect its financial performance [2][5]. - Despite the expected decline in sales to China, some analysts believe Nvidia may still meet its revenue targets for the first quarter due to strong demand for its H200 chips [5][6]. - UBS estimates that earnings per share could decrease by 20 cents, while Morgan Stanley predicts an 8% to 9% drop in data center revenues in the near term [6]. Group 3: Market Dynamics - Nvidia has been attempting to reduce its reliance on the Chinese market over the past two years, indicating a strategic shift in its business model [7]. - The company’s chips are highly sought after, and analysts suggest that tariffs are less concerning than export restrictions, which could have broader implications [8]. - Upcoming AI diffusion rules from the Biden administration could further restrict exports to additional countries, potentially impacting Nvidia's market reach [9]. Group 4: Future Outlook - Analysts express optimism regarding Nvidia's relationship with the government, suggesting that this could help mitigate some regulatory concerns moving forward [10].