Nvidia,the world's largest AI chip designer,has become the latest tech giant to be caught up in the ongoing US-China trade war crossfire.In the latest development in the escalating struggle for supremacy in artificial intelligence, Nvidia announced on Tuesday that it would suffer a $5.5 billion financial setback after Washington imposed new limits on the export of its H20 AI processors to China.

Nvidia stock (NVDA) has already fallen 6.87% following a steep decline in premarket activity. Nvidia's export limitations coincide with President Donald Trump's tariffs, which are upsetting international markets and casting doubt on the future of global economic expansion.

Due to the plethora of new products tariffs and the uncertainties surrounding future trade policies, the World Trade Organization stated on Wednesday that its projections for global commerce this year had "deteriorated sharply."

Just last year, Nvidia was able to continue exporting to China thanks to the H20 chip, which was specifically designed to comply with strict US export regulations. The more potent H100 AI chip, which has previously been prohibited from being sold in China, has more processing capacity than the model.

Jay Hatfield, CEO of Infrastructure Capital Advisors, stated, "Nvidia specifically designed the H20 to comply with US exports restrictions...now the rules change and they lost $5 billion." "So, businesses are losing a lot of money as a result of this inconsistent trade policy."

It is thought that the H20 helped DeepSeek create its ChatGPT-like reasoning AI model, R1, which was reportedly trained at a tenth of the price of its American counterparts. The breakthrough caused a stir in China's AI revolution and shocked the IT sector.

In a regulatory statement on Tuesday, , but the limitations represent a "strategic blow" to Nvidia's attempts to keep up with its Chinese clientele.

In a research note released on Tuesday, they stated, "This disclosure is a clear sign that Nvidia now has massive restrictions and hurdles in selling to China as the Trump Administration knows there is one chip and company fueling the AI Revolution and it's Nvidia."

New Export Rules

Nvidia stated that the US government had notified it last week that the H20 chips would now need a special license in order to be sold to China, which accounted for 13% of sales last year.

On May 28, the chipmaker announced that it will include charges of almost $5.5 billion for "inventory, purchase commitments, and related reserves" related to H20 products in its first quarter profits.

The financial impact is minimal, according to analysts lead by Dan Ives, global head of technology research at financial services company Wedbush Securities

As the US tries to prevent China from using American technology to develop its military and AI systems, the leading AI chip designer has been caught in the crossfire in recent years.

According to Reuters, the US Commerce Department said on Tuesday that it would be imposing new export license requirements on exports of Nvidia's H20 and AMD's MI308 chips, as well as their equivalents, to China.

According to a Commerce Department official, "The Commerce Department is committed to acting on the President's directive to safeguard our national and economic security."

According to the petition, Nvidia was informed that the license requirement will remain in effect indefinitely. How the US government would issue the licenses remains unknown and the company has declined to make further comments beyond this filing.

Morgan Stanley analysts stated in a note on Wednesday that although the Trump administration's decision to impose restrictions on H20 chips was widely anticipated, the measure was more sudden than expected.

American politicians from both parties have asked for stricter export regulations on AI processors after DeepSeek's R1 model rocked international markets earlier this year.

China has had an AI boom in the months since DeepSeek's disclosure, which has stimulated investment and put pressure on Chinese businesses to develop their AI industry. The rise in investor confidence in the nation's technology industry has propelled stock rallies in China and Hong Kong.

Nvidia's H20 graphics processing units have been widely used by DeepSeek and numerous other well-known IT companies in China. Brady Wang, associate director of Counterpoint Research, a market analysis organization, claims that although Chinese tech giant Huawei and AI chipmaker Cambroon have created alternatives to H20s, those Chinese-made chips typically trail in performance, especially in software maturity.

According to Wang, "Nvidia's superior ecosystem and manufacturing advantages" would likely lead the performance gap between Chinese and Nvidia processors to expand, even as DeepSeek's success shows that high-performing AI models can be trained on lower-spec hardware.

According to a new report by the WTO,these tariff wars will significantly reduce global and US economic growth. Global economies will grow more slowly than they would in the absence of tariffs, according to WTO projections. This slowdown will be more pronounced in North America, which is dominated by the United States, than in other regions.

According to the World Trade Organization, the global gross domestic product is expected to grow by 2.2% this year. Compared to the rate it would anticipate in the absence of further tariffs, that growth would be 0.6 percentage points slower.

The effects will be much more pronounced in North America, where GDP growth is predicted to be 1.6 percentage points less than it would be otherwise.