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Nvidia (NASDAQ:NVDA) is facing new U.S. export restrictions that effectively halt sales of its H20 AI chips to China, a move analysts see as a strategic escalation in the ongoing trade standoff between Washington and Beijing. The restriction requires an indefinite license, signaling what Wedbush called a clear shot across the bow from the U.S. to China.
Nvidia shares dropped north of 6% in premarket trading on the news.
The policy change takes effect immediately, just weeks before the quarter closes, prompting concerns over inventory and sales impact. Nvidia is expected to write down $5.5 billion in inventory, which could have translated to more than $12 billion in revenue at gross margins near 60%, according to Morgan Stanley's Joseph Moore. He noted the lack of optimism around receiving necessary licenses suggests deeper disruptions ahead.
While not a complete ban, the licensing requirement sends a strong message. The decision coincides with China appointing a new trade negotiator, Li Chenggang, replacing Wang Shouwen.
Despite recent Nvidia announcements pledging $500 billion in U.S. investments over four years, analysts say this development reinforces the deepening trade divide. More policy actions from both countries are expected before negotiations possibly resume.
This article first appeared on GuruFocus.