Nvidia’s chips are among the world’s hottest commodities. So why is the company likely trashing $4.5 billion worth of them?
From Yahoo Finance: 2025-06-03 15:37:00
Nvidia suffered a $4.5 billion write down on chips intended for China due to export regulations. The chips, known as H20, were developed specifically for the Chinese market, limiting their use elsewhere. Selling them at a discount could affect Nvidia’s image as a provider of innovative technology.
Although major Chinese firms purchased Nvidia’s H20 chips, U.S. companies likely have little interest in them. The chips were designed to prevent Chinese firms from replicating advanced AI models created by U.S. companies. Salvaging some inventory reduced the first-quarter writeoff to $4.5 billion.
The H20 chips are likely to be discarded due to the high cost of repurposing them. The undeliverable chips, sitting in locations like Taiwan and Hong Kong, resulted in a revenue loss for Nvidia. Despite this setback, Nvidia’s overall revenue remains strong with a healthy net profit margin.
Writing off the full value of the chips provided Nvidia with an immediate tax benefit. The impact of the writeoff on Nvidia’s manufacturing partners and suppliers, such as TSMC, Samsung, and Micron, will be crucial in the coming months. Investors remain optimistic about Nvidia’s future despite the inventory writeoff. Nvidia analyst Harsh Kumar predicts potential for Nvidia to complete H20 chip sales in China if Trump lifts export ban. Unclear how realistic this scenario is after Trump appealed block on tariffs. New export ban hinders chip delivery to China for national security reasons, but could potentially boost Nvidia’s stock in the future.