AMD and Nvidia, two giants in the semiconductor industry, are currently navigating a complex landscape of inventory adjustments and evolving export regulations. These challenges stem primarily from increased restrictions on AI chip exports to China, impacting their revenue projections and strategic positioning.

The U.S. government has recently tightened export rules, imposing new licensing requirements on shipments of advanced AI chips to China. This move is designed to prevent the use of high-performance chips in Chinese supercomputing and military applications, but it has significant financial implications for both Nvidia and AMD. Specifically, the new regulations target Nvidia's H20 and AMD's MI308 chips, requiring licenses for their export to China, Hong Kong, and Macau.

Nvidia anticipates a $5.5 billion charge in its fiscal 2026 first-quarter results due to these export limitations. The company had tailored its H20 chip to comply with previous U.S. export controls while maintaining competitiveness in AI inference tasks. However, the updated restrictions now require licenses for H20 exports, affecting Nvidia's contracts with major Chinese tech firms like Tencent, Alibaba, and ByteDance, who had increased orders for these chips to power their AI innovations. These charges are primarily related to unsold inventory, purchase commitments, and related reserves, highlighting the importance of the Chinese market to Nvidia's revenue. Despite these challenges, Nvidia is investing heavily in U.S.-based infrastructure, planning to build AI servers worth up to $500 billion over four years to support domestic semiconductor manufacturing.

Similarly, AMD expects to incur charges of up to $800 million due to the export restrictions, particularly affecting its MI308 AI chips. China accounts for a substantial portion of AMD's revenue, approximately 24% in 2024, amounting to $6.23 billion. The financial impact includes inventory adjustments, supplier commitments, and potential write-offs. AMD plans to apply for export licenses, but the outcome remains uncertain.

These restrictions have led to a decline in share prices for both companies. Following the announcement of the new export rules, Nvidia's share price fell by 6.5%, and AMD also experienced a significant drop. The broader semiconductor industry has been affected, with other chip stocks also declining.

The U.S. Commerce Department has stated that these measures align with the President's directive to safeguard national and economic security. However, experts suggest that Chinese companies may find ways to circumvent these restrictions, potentially through third countries like Singapore.

While the export restrictions present immediate challenges, they also create opportunities for Nvidia and AMD to diversify their markets and focus on regions like Europe, India, Japan, South Korea, and the Middle East. AMD is also strategically increasing its GPU supply to potentially gain market share against Nvidia, whose RTX 50-series has faced stock shortages and price increases. By ensuring a robust supply, AMD aims to position itself as a more consumer-friendly option.

Both Nvidia and AMD are adapting to the changing geopolitical landscape by developing export-compliant products and diversifying their production and R&D footprints. However, uncertainty around licensing and trade policies continues to affect revenue projections. The situation highlights the intricate balance between national security concerns and the global semiconductor market, requiring companies to navigate complex regulations while striving to maintain their competitive edge.