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Nvidia missed out on $2.5 billion in additional revenue during the first quarter of this year because it had to stop shipping its H20 artificial intelligence chips to China after the Trump administration instituted fresh export restrictions last month.
Despite those unearned sales — revealed in the company’s earnings report Wednesday — Nvidia took a smaller blow from the new H20 restrictions during the quarter than expected. It took a $4.5 billion charge in the quarter associated with excess H20 inventory and purchase obligations it couldn’t fill because of the export controls, although it had warned investors last month the hit might be as high as $5.5 billion.
Investors had been watching the impact of the H20 export controls because they underscore Nvidia’s increasingly tenuous position at the center of an increasing US-China trade and tech war. The smaller than expected charge is likely to be viewed as a positive sign, although the company added it expects to lose out on another $8 billion in revenue during the second quarter because of the H20 controls.
Nvidia’s shares rose 3.5% in after-hours trading following the report.
Nvidia last year released the H20 chip to accommodate stringent US export controls to China while maintaining access to the market, which accounted for around 13% of its sales last year. But in April, the White House told the company it would need a special license to export the H20 — which is widely believed to have contributed to the powerful Chinese AI model DeepSeek — to China. Nvidia CEO Jensen Huang has called US chip export controls a “failure.”
Huang told analysts on a call Wednesday evening that Nvidia is exploring how else it can compete in China, but reiterated his opposition to the export controls.
“China’s AI moves on with or without us,” he said. “The question is not whether China will have AI — it already does — the question is whether one of the world’s largest AI markets will run on American platforms.”
He added that shielding Chinese tech companies from American technology “only strengthens” foreign rivals and “weakens America’s position.”
But despite the uncertainty caused by the White House’s trade policy, Nvidia’s overall business continues to grow at a striking clip.
The chipmaker exceeded Wall Street analysts’ expectations for both revenue and profits during the first quarter. It earned $44.1 billion in revenue, up 69% from the same period in the prior year. And its net income grew 26% year-over-year to $18.8 billion.
“Even during a period of industry consolidation — with growing competition and geopolitical tensions creating a more challenging macro environment — the company demonstrated its ability to focus on the right operational areas,” Thomas Monteiro, senior analyst at Investing.com, said in emailed commentary. He added that the smaller than expected impact from the H20 controls “highlighted Nvidia’s adaptability to changing market conditions.”