San Francisco, California – Nvidia’s stock experienced a decline in premarket trading on Wednesday as the chip giant issued a warning regarding the impact of Trump Administration restrictions on exporting H20 chips to China. The Nasdaq was also set to open lower as a result of this development.

The government communicated to Nvidia that special licenses would now be necessary to sell to Chinese customers for an indefinite period, as stated in an SEC filing by the chip giant on Tuesday evening. In response to this, Nvidia announced that it anticipates taking a charge of up to $5.5 billion in its upcoming first-quarter earnings, concluding on April 27.

Shares of Jensen Huang’s company had already fallen by almost 19% this year by the close of trading on Tuesday. The H20 chips produced by Nvidia were tailored to comply with Biden-era export controls on chips sent to China, amid the ongoing AI arms race between the world’s superpowers.

The Trump administration views the license requirements as a precautionary measure to address the risk of China establishing its own supercomputer, Nvidia disclosed in the filing. Analysts at Jefferies characterized the licensing measure as effectively banning H20 chips, highlighting the concerns over potential usage or diversion of these chips for supercomputers in China.

In contrast, Bernstein analysts questioned the rationale behind banning the H20 chip, citing its lower performance compared to already available Chinese alternatives. The ban, according to them, effectively cedes the Chinese AI market to Huawei. Nvidia chose not to comment on the matter, and the White House did not respond to queries for comment on the issue.

Nvidia explained in the filing that the charges being incurred could stem from already manufactured H20 chips that may now face difficulties in being sold. It also accounts for the costs associated with producing the chips and probable additional funds needed to cover potential future losses.

Furthermore, the Trump administration has initiated steps towards imposing tariffs on chips, including investigations by the Commerce Department into semiconductor imports. These probes aim to determine the impact of such imports on national security, potentially providing President Donald Trump with grounds to impose tariffs on crucial tech goods.