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Yahoo
7 days ago
- Business
- Yahoo
Nvidia's chips are among the world's hottest commodities. So why is the company likely trashing $4.5 billion worth of them?
Nvidia's blockbuster quarterly earnings last week came with a big dose of negative news: A $4.5 billion write down on chips originally destined for customers in China that will ultimately go undelivered. The company had developed the so-called H20 chips, which are less powerful than its top-of-the-line semiconductors, to comply with Biden Administration regulations against sending technology to foreign adversaries that could help their AI efforts. The Trump Administration, however, went a step further in early April and banned exports of even second-tier chips. 'We are taking a multibillion dollar write off on inventory that cannot be sold or repurposed,' said Nvidia CEO Jensen Huang on a May 28 earnings call. The details around the decision to write the value of the chips to zero—rather than sell them to other customers—wasn't explained. The company added, without elaborating, that it's 'exploring limited options' for the unused inventory, a move that would apparently fall short of selling the chips. The H20 was built specifically for the China market under the old export rules. Because of the chip's design and limited capabilities, it may be difficult to use in other countries. 'It doesn't really fit anywhere else without a lot of expensive tweaking,' says Arash Azadegan, a professor of supply chain management at Rutgers Business School. This tweaking could involve additional costs for Nvidia. Furthermore, some of the chips may 'not meet the performance needs of customers in other regions' or may be engineered 'specific to Chinese customer requests or requirements,' says Chad Autry, a University of Tennessee supply chain professor. Even if it could sell the chips by cutting their price, Nvidia would risk damaging its image as a seller of top-tier innovation. The company's new Blackwell GPUs, after all, power cutting-edge AI like OpenAI's yet-to-be-released GPT-5 model. '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,' says Azadegan, referencing Blackwell's used in new products from Amazon's AWS, Microsoft Azure, Google Cloud, and Oracle, among others. Nvidia declined to comment beyond what its executives said during the company's earnings call last week. After China-based DeepSeek released its ChatGPT rival in January, major Chinese firms like Alibaba, ByteDance, and Tencent purchased Nvidia's H20 chips, Reuters reported in February. These companies have likely developed powerful AI capabilities using H20 chips, so there's little reason to believe that U.S. companies could not do the same if Nvidia sold H20 to them. But Nvidia and U.S.-based customers probably have no interest in this, says Matthew Bryson, a Wedbush Securities managing director who covers Nvidia. 'The reason that these products are going to China is because everyone would choose something better.' Bryson explains that the technology underpinning H20s 'would never have been made' if not intentionally engineered to prevent Chinese firms from building models similar to U.S.-made advanced AI applications. And if Nvidia sold the chips at a big discount to reflect their U.S. market value, it could 'cannibalize' sales of better products, he says. Nvidia had initially expected to have to write off $5.5 billion of chip inventory from its balance sheet. But it managed to salvage about $1 billion of H20 inventory by '[reusing] certain materials,' reducing the realized first-quarter writeoff to $4.5 billion, chief financial officer Colette Kress said on last week's earnings call. Unsurprisingly, she noted that as a result of the Trump Administration's new export rule, Nvidia will take a revenue hit from Trump's China ban in the first half of the year. The company booked a $2.5 billion loss in first quarter revenue and predicted a steeper $8 billion revenue loss in the second one. The question remains of what happens with this H20 stockpile. Supply chain experts interviewed by Fortune suspect it will be discarded. 'These chips will meet the 'cool lava lamp' you got from your aunt in a landfill somewhere,' Alan Amling, a professor of supply chain at the University of Tennessee's Haslam College of Business, wrote to Fortune via email. 'With so many other growth opportunities, the opportunity cost of repurposing, retesting and requalifying these chips was obviously too high a bar.' Because of how quickly the new export rules under Trump took effect, the undeliverable H20 chips are likely sitting in U.S.-friendly places like Taiwan and Hong Kong, said University of Tennessee's Autry. Taiwan-based TSMC manufactures much of Nvidia's inventory meant for China-based customers, and Nvidia's fulfillment partners are in nearby countries. Writing off the H20 chips had minimal short-term impact on Nvidia's otherwise booming business. Nvidia reported first quarter revenue of $44.1 billion (up 69% year-over-year) and $18.8 billion in net income, representing a healthy 42.6% net profit margin. Writing down the full value of the chips provides an immediate tax benefit by reducing the company's taxable income. Depending on Nvidia's future sales prospects and costs, this benefit could outweigh or come close to the financial benefit of selling the chips at a steep discount. 'Nvidia is going to be alright; investors of Nvidia are going to be alright,' says Rutgers' Azadegan. 'The real story,' he said, is that Nvidia's manufacturing partners like TSMC and suppliers, including Samsung and Micron, could be most impacted by the H20 inventory writeoff because they've built businesses by serving critical functions in Nvidia's supply chain. The magnitude of the impact to these partners will be determined in the months and years ahead, notes Azadegan. 'It's never on a dime that we can pivot.' Nvidia analyst Harsh Kumar of Piper Sandler is hopeful that Trump eventually undoes the blockade on H20 chips to China. If so, Nvidia could finally complete the H20 sales or deliver the chips to new customers in China, assuming the company holds onto the H20 inventory. It's unclear how realistic this scenario is after the Trump administration appealed a judge-imposed block on his 'Liberation Day' tariffs. Still, Trump's new export ban prevents Nvidia from delivering chips to China for national security reasons, so it may have little to no correlation with his tariff agenda. 'To me, it almost implied that there is a pathway that Jensen [Huang] and Nvidia see for this H20 chip to be sold back into China,' Kumar told Fortune, potentially helping to propel the company's already high-flying stock to greater heights in the future. This story was originally featured on Sign in to access your portfolio
Washington Post
12-05-2025
- Business
- Washington Post
Here's how Congress can raise billions — without raising taxes
Jay A. Soled is a distinguished professor of taxation at Rutgers Business School. James Alm is a professor emeritus of economics at Tulane University. Republicans are looking everywhere for ways to raise more revenue short of raising taxes. This magic trick is not easily accomplished. Taxpayers, even those embracing the MAGA mindset, are not holding out their wallets and, in a burst of civic patriotism, pleading with the government to take their money.
Associated Press
12-05-2025
- Business
- Associated Press
Rutgers Business School launches initiative to help students graduate on time
A pilot program, funded by alumni and corporate partners, is already helping students reduce the time they spend working so they can stay on track to graduate in four years. NEWARK, N.J., May 12, 2025 /PRNewswire/ -- Brittany Rodriguez has regularly sacrificed sleep and 'friend time' so she can keep up with her classes at Rutgers Business School, maintain her grades, and spend at least 20 hours a week working to help pay for school. After transferring into Rutgers from Union County College, she took five classes her first semester in order to get on track to graduate in two years. She juggled her class work around an administrative job in a dentist's office and part-time work as a tutor. 'It became a little overwhelming,' said Rodriguez, who is a junior. A pilot of Rutgers Business School's On-Time Graduation Initiative eased some of the pressure on her during the past semester. Rodriguez is one of 10 students at Rutgers Business School-Newark who received a $1,800 scholarship so they could reduce the number of hours they are working around college classes. The scholarships were created through alumni giving and donations from corporate friends of the business school. 'We created the On-Time Graduation Initiative as a way of providing well-performing students with some relief from the burden of working one or two jobs while they're trying to finish college and prepare for a career,' said Lei Lei, dean of Rutgers Business School. Luke Greeley, associate dean of the undergraduate program at Rutgers Business School-Newark, said he first realized the significance of the issue about three years ago when he was teaching a mandatory business forum class. Students who were working 20 hours or more a week had trouble keeping up with assignments and maintaining their grades. 'I worked through college,' Greeley said. 'I know the what the struggle is like. I know it's real.' The concern that Lei and Greeley have isn't limited to the effect on academic performance but also the additional years that some students spend earning their degrees while they juggle classes and the number of credits they take each semester around work schedules. Only about half of students attending Rutgers Business School-Newark are graduating college in four years, according to information from the undergraduate office. And Rutgers Business School isn't alone. Across the country, public research universities show high rates of delayed graduations. According to the U.S. Department of Education, the University of Maryland, the University of Texas-San Antonio and Temple University have 4-year graduation rates that average around 40 percent. At Rutgers University-Newark overall, the 4-year graduation rate is 42 percent. 'The initiative is a good way to help the Newark program,' Greeley said. Alumnus Frank Palumbo, a retired Cisco sales executive, was quick to become a supporter of the pilot. Palumbo worked part-time on afternoons and weekends as an undergraduate, but he said he knew others had a more difficult juggle. One classmate, he remembered, worked all night and then came straight to class afterward. 'As a Rutgers-Newark alumnus, it is a privilege to be part of empowering students to graduate on time,' Palumbo said. 'This allows them to focus on their education and personal growth and paves the way for their future success.' The $1,800 scholarship Rodriguez is receiving as part of the pilot allowed her to drop her work hours one day a week. She uses that day to focus on studying and concentrate on several group projects that she has this semester. David Ruiz, a junior studying supply chain management and fashion, typically works 24 hours as a concierge at an upscale residential building on Hoboken's waterfront. 'It can be hard,' he said of juggling work with classes. 'Sometimes, it feels like too much. I try to push through.' Ruiz said this semester one of his family members became ill, making his financial situation tougher. 'If it weren't for this scholarship, I probably would have had to drop out so I could work more,' he said. Instead, he has been able to keep Thursdays and Fridays clear of work to focus on class assignments. 'I'll be able to invest more time on my class work instead of just doing what I have to get by,' he said. The results of the pilot will be reviewed by Rutgers Business School leaders. The plan is to launch the initiative on a larger scale in the fall. Efforts are also underway to expand the initiative to help working students attending Rutgers Business School-New Brunswick. Rutgers University alumnus Keith Banks, who is a long-time champion of the business school, and his wife, have backed the initiative. 'When I learned about students taking six years to graduate due to their need to work, I was inspired to get involved,' said Banks, former vice chair at Bank of America. 'The goal is to ensure that all motivated students have the ability to graduate on time irrespective of their financial circumstances.' Joanna Mulford, a managing director and senior portfolio manager at PGIM Real Estate who sits on the dean's advisory board as well as the scholarship committee for the Rutgers Center for Real Estate, praised the On-Time Graduation Initiative. Her company is supporting the pilot. In her work for the Center for Real Estate, Mulford said scholarships have been awarded regularly to help ease the burden on students. 'I have seen first-hand the positive impact this support has had on students and their ability to work fewer hours while pursuing their degrees,' she said. Dean Lei said the results of the pilot will be measured to provide justification for continuing the scholarships. 'We are grateful to our alumni whose generosity and empathy are making the pilot program possible this semester,' she said. 'We hope to make an even greater impact on the lives of our students and their families with a permanent On-Time Graduation Initiative.' View original content to download multimedia: SOURCE Rutgers Business School
