US stocks opened in the red on Wednesday morning after the Commerce Department unveiled new restrictions on popular chip exports to China – and Nvidia warned it could cost the chipmaker billions of dollars.
The Dow Jones Industrial Average plunged 194 points, or 0.5%, shortly after the regular trading session began at 9:30 a.m ET.
The S&P 500 and the Nasdaq fell 0.9% and 1.7%, respectively.
The Commerce Department announced on Tuesday that it was mandating new licensing requirements for Nvidia and AMD to export popular chips to China.
Nvidia said it would be hit with $5.5 billion in charges due to the new regulations, which would limit exports of its popular H20 artificial intelligence chip to China, one of its key markets.
Shares in Nvidia and AMD plunged 5.5% and 6.3%, respectively, on Wednesday morning.
Stocks had been on a rebound after a volatile week of trading, as President Trump’s back-and-forth on tariffs — unveiling stiff taxes and then pausing them for 90 days — spooked investors.
The White House has imposed a hefty 145% tax on goods from China, and temporarily lowered all other rates to 10% as the administration holds negotiations with several nations.
The stricter rules on semiconductors are just the latest move from US officials to keep advanced chips from making their way to China to prevent the nation from building powerful supercomputers and edging ahead in the AI race.
“The Commerce Department is committed to acting on the President’s directive to safeguard our national and economic security,” a spokesperson for the department said in a statement.
Chinese companies, including Tencent, Alibaba and ByteDance, which owns TikTok, had been ramping up their orders for Nvidia’s H20 chips to keep up with demand for low-cost AI models after DeepSeek’s roaring debut, according to a Reuters report.
Nvidia was reportedly made aware of the incoming export rules last week, but did not warn some of its major customers in advance, sources familiar with the matter told Reuters.
Nvidia declined to comment.
The loss of these customers could significantly hammer Nvidia’s business, which had secured $18 billion worth of H20 orders since the start of the year, according to the report.
Nvidia’s H20 is the main chip it is legally allowed to sell to Chinese customers. Since 2022, the company has faced increasingly strict restrictions as the US fears advanced chips could help China advance its military power.
The latest chip export curbs could push Chinese firms to purchase chips from local competitors, like Huawei.
Costs for chipmakers in the US, meanwhile, are expected to soar due to Trump’s sweeping tariffs.
The new taxes could cost semiconductor equipment makers more than $1 billion a year, according to industry calculations discussed with White House officials, per a Reuters report.
The three largest US chip equipment manufacturers – Applied Materials, Lam Research and KLA – may lose roughly $350 million each per year, sources said.
Smaller rivals could also be slapped with tens of millions of dollars in additional costs.
With Post wires
