Nvidia Faces Billions in Lost Revenue Over H20 Chip Rules
▼ Summary
– Nvidia reported a $4.5 billion charge in Q1 due to U.S. chip-export restrictions limiting H20 AI chip sales to China.
– The company also lost $2.5 billion in potential H20 revenue in Q1 because of these restrictions.
– Nvidia expects an $8 billion revenue hit in Q2 due to licensing requirements, impacting its projected $45 billion revenue.
– CEO Jensen Huang stated that Nvidia is exploring ways to compete in China’s AI market but faces a closed $50 billion market due to export bans.
– Huang criticized U.S. export restrictions, arguing they strengthen Chinese chipmakers and weaken America’s global AI leadership.
Nvidia’s financial performance has taken a significant hit due to recent U.S. export restrictions on AI chips, with billions in revenue now at risk. The company reported a staggering $4.5 billion charge in its fiscal first quarter, directly tied to licensing hurdles preventing the sale of its H20 AI chip to Chinese customers. An additional $2.5 billion in potential H20 revenue went unrealized during the same period because of these constraints.
Originally, Nvidia had projected $5.5 billion in losses from the export rules when they were first announced in April. However, the impact appears even more severe than anticipated. The company now expects an $8 billion revenue shortfall in the second quarter, which could drag down its projected $45 billion earnings—a substantial blow to its bottom line.
During the earnings call, CEO Jensen Huang acknowledged the challenges of operating in China’s AI market under current restrictions. He emphasized that while China remains a critical hub for AI innovation—home to half of the world’s AI researchers—the $50 billion market is effectively off-limits for Nvidia’s Hopper data center products. “We cannot modify Hopper further to meet compliance,” Huang stated, signaling that the company has reached a regulatory dead end.
Nvidia has been vocal in opposing U.S. policies restricting chip exports, particularly those targeting China. Huang welcomed the recent reversal of Biden’s proposed Artificial Intelligence Diffusion Rule, which would have tightened export controls further. Still, the existing Trump-era restrictions continue to disrupt Nvidia’s business, forcing the company to reassess its strategy in one of the world’s most lucrative AI markets.
Huang warned that isolating Chinese chipmakers from U.S. competition could backfire, strengthening domestic players while weakening America’s global influence in AI development. “China already has AI capabilities,” he noted. “The real issue is whether its market will rely on American technology or turn inward.”
As Nvidia navigates these regulatory hurdles, the company is exploring alternative approaches to maintain its foothold in AI—but for now, the financial repercussions are undeniable. The latest earnings update underscores how geopolitical tensions are reshaping the semiconductor industry, with Nvidia caught in the crossfire.
(Source: TechCrunch)
