Nvidia Corporation NVDA is reportedly redesigning its H20 artificial intelligence chip for the Chinese market after U.S. export controls effectively blocked the original version, with plans to launch the modified chip as early as July.
What Happened: Nvidia has notified major Chinese customers, including top cloud service providers, that it intends to release a downgraded H20 chip within the next two months, reported Reuters, citing sources familiar with the matter.
The move comes after the U.S. government informed Nvidia last month that the original H20 would require an export license, effectively banning it from sale in China under tightened national security rules.
Following this, Nvidia revealed that export restrictions might lead to a revenue loss of $5.5 billion.
The company has since developed new technical thresholds to guide the modified design, which will include substantial reductions in memory capacity and potentially other performance adjustments, the report noted.
Nvidia did not immediately respond to Benzinga's request for comments.
Why It's Important: Chinese tech giants such as Tencent Holdings TCEHY, Alibaba Group BABA and ByteDance earlier this year ramped up H20 orders to fuel a growing demand for cost-effective AI solutions, especially from startups like DeepSeek.
Since January, Nvidia has reportedly accumulated $18 billion worth of H20 orders. However, in March, Chinese server maker H3C warned of a possible shortage of Nvidia's H20 chips.
Earlier this month, Nvidia CEO Jensen Huang informed U.S. lawmakers that AI chip export restrictions might be giving China's Huawei Technologies a competitive advantage.
That same day, Nvidia also criticized AI startup Anthropic for supporting tighter U.S. export controls on AI chips to China.
Price Action: Nvidia shares dipped by 0.27% to $117.05 in after-hours trading, according to Benzinga Pro.
Benzinga Edge Stock Rankings gave Nvidia a strong growth score of 94.76%. Click here to see how it stacks up against other major tech players like Alibaba and Tencent.
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