Two people familiar with the matter said that NVIDIA Corporation did not warn at least some major customers in advance about information regarding the new US export rules. About a week ago, the company was informed that the new export rules required it to obtain a license for selling its AI-focused chips to China.

The American chip manufacturer disclosed on Tuesday that US officials had notified the company on April 9 that its H20 chips needed an export license to be sold in China.

The move to restrict the export of H20 chips is the latest effort by the US government to limit China's access to advanced semiconductors as it seeks to maintain its advantage in artificial intelligence technology.

According to two sources, China's major cloud computing companies still expect the delivery of H20 chips by the end of the year but are unaware of the impending restrictions. The sources also said that NVIDIA's sales team in China apparently did not receive prior notice before the announcement. Due to the sensitivity of the situation, the sources requested anonymity.

NVIDIA declined to comment.

Export controls threaten NVIDIA's business in China, which is one of its largest markets. According to two sources and another source, NVIDIA has received orders worth $18 billion for H20 chips since the beginning of this year.

In the fiscal year ended January 26, China accounted for $17 billion in revenue for NVIDIA, representing 13% of its total sales.

NVIDIA's stock fell 6% in after-hours trading on Tuesday following the company's announcement that it would incur up to $5.5 billion in charges in the first quarter ending April 27 due to licensing requirements. On Monday, the US government informed the company that the licensing requirement would be indefinite.

The company stated that these charges were related to inventory, purchase commitments, and reserves associated with H20 products.

Due to the surge in demand for cost-effective AI models from startups like DeepSeek, ByteDance, TikTok's parent company, also increased its orders for H20 chips.

Alibaba, ByteDance, and Tencent have not yet responded to requests for comment.

H20 is NVIDIA's main chip that can be legally sold in China, launched after the latest round of US export restrictions took effect in October 2023.

Washington has banned exports of NVIDIA's most advanced chips to China since 2022 over concerns that China might use advanced technologies to enhance its military capabilities.

Analysts said that the restrictions on H20 could benefit Chinese AI chip manufacturers, especially Huawei, which provides competitive products for NVIDIA's product line.

"By restricting H20 systems, US regulators are essentially pushing NVIDIA's Chinese customers toward Huawei's AI chips. As Huawei gains more customers and development experience, its chip design and software capabilities may rapidly improve," said Nori Chiou, investment director at Singapore-based White Oak Capital Partners.

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