Nvidia Just Dodged an $8 Billion Bullet, Thanks to Donald Trump
In a significant triumph amid the global tech conflict, Nvidia, the world's most valuable company, has been granted a license by the Trump administration to resume selling its specialized AI chips in the Chinese market. This decision comes after persistent lobbying efforts and direct appeals from Nvidia's CEO, Jensen Huang, to the White House.
The outcome is a huge financial reassurance for Nvidia. The license allows the company to dodge a forecasted $8 billion revenue shortfall for the fiscal year and re-engage with a market that Jensen Huang estimates could surge to $50 billion in the upcoming years.
The Financial Times reported that this breakthrough occurred shortly after Huang's meeting with President Donald Trump at the White House on August 6. Within days, the Commerce Department, responsible for export controls, issued the first licenses permitting Nvidia to sell its H2O chips in China, marking a substantial victory.
The High-Stakes Background
This decision is part of the broader U.S.-China tech war, primarily fueled by concerns that advanced American technology may be utilized by Beijing for military AI development. Consequently, the U.S. imposed stringent export controls to ban the sale of top-tier AI chips to China.
Nvidia's high-powered processors, like the Blackwell series, are banned from export to China. Interestingly, Nvidia ingeniously developed the H2O chip, a less potent version of its advanced technology, to adhere to the original export guidelines. Despite this, the U.S. under Trump further tightened these controls in April, prohibiting even the sale of H2O chips. This resulted in Nvidia halting shipments and incurring a $4.5 billion charge for excess inventory. The company then warned it might lose $8 billion in revenue due to these restrictions.
The Power of Personal Diplomacy
Reversing this policy required months of rigorous diplomatic negotiations and efforts. Jensen Huang’s personal engagements with the White House were pivotal. His diplomatic charm seems to have altered President Trump's viewpoint. At a recent AI summit at the White House, Trump disclosed that his initial consideration was to take antitrust action against Nvidia. However, his perspective changed after a deeper engagement with Huang.
Trump was quoted saying, “I said, 'Look, we’ll break this guy up,' before I learned the facts of life,” regarding Huang. “I said, 'Who the hell is he? What’s his name? What the hell is Nvidia? I’ve never heard of it before.’” However, after understanding Nvidia’s critical role, he viewed safeguarding the company’s financial health as essential to sustaining America’s dominance in AI technology.
What This Means for the World’s Biggest Company
This development is a sigh of relief for Nvidia. The company, recently becoming the first to reach a $4 trillion market valuation, currently stands around $4.45 trillion. With the $8 billion revenue risk now eliminated and the huge Chinese market open again, Nvidia's upcoming quarterly earnings report is eagerly anticipated by investors. Another strong report could propel the company near the groundbreaking $5 trillion market value.
Nvidia and the Commerce Department have yet to comment on this recent development.
