Nvidia may be leading the AI revolution, but even the world’s top chipmaker isn’t immune to the unpredictable fallout of global politics. Last week, as the company reported another strong earnings report, CEO Jensen Huang revealed the sobering news of a $4.5 billion write-off for chips that were supposed to be sent to China and now have nowhere to go, as per a report.
Huang said during the earnings call that, “We are taking a multibillion dollar write off on inventory that cannot be sold or repurposed,” quoted Fortune.
The China-Only Chips That Can’t Be Used
The chips, which have led to the massive loss, known as the H20 chips, were designed by Nvidia specifically for Chinese clients to meet earlier US export restrictions, according to the report. These chips we ..
But things changed after US president Donald Trump took office, as he went a step further in early April and banned exports of even these chips, according to the report.
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Why the Nvidia H20 Chips Can’t Just Be Repurposed
As the H20 chip was built only for the Chinese market, the chip’s design and limited capabilities make it a challenging task to be used by other countries, reported Fortune. A professor of supply chain management at Rutgers Business School, Arash Azadegan said, “It doesn’t really fit anywhere else without a lot of expensive tweaking,” as quoted in the report.
While, the tweaking would involve additional costs for the AI chipmaker, as these chips may “not meet the performance needs of customers in other regions” or may be engineered “specific to Chinese customer requests or requirements,” according to Chad Autry, a University of Tennessee supply chain professor, reported Fortune.
Nvidia Won’t Risk Its Reputation
Azadegan also highlighted that, “Nvidia probably doesn’t want to flood the market with discounted chips—it could mess with their pricing, confuse customers, and distract from their big push into the newer Blackwell lineup,” as quoted in the report.
FAQs
Why did Nvidia have to throw away $4.5 billion in chips?
Because new US export rules suddenly banned the chips from being sold to China, their only intended market.
Can’t they just sell the chips to other countries?
No as the chips were custom-made for China and don’t meet other countries’ needs without costly changes.
Source Name : Economic Times