The Trump administration's recent ban on NVIDIA (NVDA, Financial) selling AI chips to China is likely to dampen the company's future growth potential and create opportunities for competitors like Huawei. This move might only be the beginning, with the Wall Street Journal reporting that the strict "AI-Diffusion Rules" will soon take effect, risking a $28 billion loss for NVIDIA. These rules restrict the export of U.S. AI chips and affect several U.S.-friendly countries, dividing nations into three levels: unrestricted access to AI chips, quota-limited countries, and banned countries like China, Russia, Iran, and North Korea.
Major U.S. tech companies such as Microsoft (MSFT), Amazon (AMZN), and Alphabet (GOOGL) are also prohibited from establishing large AI data centers in restricted markets. Analysts estimate that these restrictions could reduce NVIDIA's revenue by up to 10%, significantly impacting its global market share and giving non-American competitors like those in South Korea, Japan, and Europe a chance to gain ground.
NVIDIA has criticized these policies as misguided and ineffective, but changes appear unlikely. Despite efforts to negotiate, including high-profile meetings with Trump, restrictions remain. The company is also facing pressure as Huawei tests AI chips that rival NVIDIA's H100, contributing to a 2% drop in NVIDIA's stock price.
