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Nvidia is taking a massive financial hit as new U.S. export rules disrupt its business in China, one of the world’s largest AI markets.
In its Q1 earnings for fiscal year 2026, which closed on April 28, the tech giant reported a $4.5 billion charge related to licensing restrictions that limit the sale of its H20 AI chips to Chinese firms. An additional $2.5 billion in shipments was also held back, further deepening the impact.
While Nvidia had previously warned in April that these restrictions could cost it $5.5 billion in Q1, the losses are expected to grow even further. For Q2, the company is projecting an $8 billion revenue hit directly tied to the H20 licensing rules. This is a major blow, especially given that Nvidia’s expected revenue for the quarter stands at around $45 billion.
During the Q1 earnings call, CEO Jensen Huang acknowledged the challenges, stating that the company is searching for alternatives to maintain a foothold in China’s AI ecosystem. However, he admitted that the restrictions have forced Nvidia to write off its H20 inventory.
He emphasized, “China is one of the world’s largest AI markets and a springboard to global success with half of the world’s AI researchers based there; the platform that wins China is positioned to lead globally today.”
Referring to the full impact, Huang added,
“The $50 billion China market is effectively closed to us. The H20 export ban ended our Hopper data center business in China. We cannot reduce Hopper further to comply.”
Clash with U.S. Trade Policy
Nvidia has voiced strong criticism of the Trump-era policies that imposed the current licensing requirements. Although the Biden administration chose to abandon a proposed Artificial Intelligence Diffusion Rule, which could have added more restrictions, Huang argued that the damage had already been done.
“The question is not whether China will have AI; it already does,” Huang stated. “The question is whether one of the world’s largest AI markets will run on American platforms. Shielding Chinese chip makers from U.S. competition only strengthens them abroad and weakens America’s position.”
Despite relief over the withdrawal of Biden’s additional rules, Nvidia’s struggles underscore a larger issue: the cost of geopolitical tension on American innovation and market reach.
