Nvidia takes $4.5bn hit due to export restrictions
jamdesign – stock.adobe.com
Nvidia warns it could miss out on $50bn market opportunity as China ramps up its AI capabilities
During the earnings call for its latest financial results, Nvidia revealed it has taken “a multibillion-dollar write-off” due to US advanced semiconductor export restrictions.
The artificial intelligence (AI) chipmaker previously downgraded its Hopper AI accelerator for the Chinese market to comply with US export restrictions. While president Donald Trump recently revoked the Framework for Artificial Intelligence Diffusion from the US Bureau of Industry and Security (BIS), which came into force in April, the export regulation controls on advanced semiconductors materially affected Nvidia’s exports of its H20 AI accelerator to China.
Nvidia said it incurred a $4.5bn charge in the first quarter of fiscal 2026 associated with H20 excess inventory and purchase obligations as the demand for H20 diminished. It said sales of H20 products were $4.6bn for the first quarter of fiscal 2026 prior to the new export licensing requirements. It said it was unable to ship an additional $2.5bn of H20 revenue in the first quarter.
According to a transcript of the earnings call posted on Seeking Alpha, denying access to the AI market in China would have a material impact on Nvidia’s business. CFO Collette Kress noted that had the export controls not occurred, Nvidia would have had orders of about $8bn for the H20 AI accelerator hardware.
“Losing access to the China AI accelerator market, which we believe will grow to nearly $50bn, would have a material adverse impact on our business going forward and benefit our foreign competitors in China and worldwide,” she added.
In her prepared statement, one of Kress’ remarks appears to have been aimed squarely at the US administration. She noted that the export restrictions simply spurred China on to innovate and scale its AI capabilities, adding: “The question is whether one of the world’s largest AI markets will run on American platforms.”
For its first quarter of 2026, Nvidia posted datacentre revenue of $39bn, 73% more than the same quarter last year. Jensen Huang, founder and CEO of Nvidia said the company was experiencing “incredibly strong” demand for its AI acceleration hardware.
“AI inference token generation has surged tenfold in just one year, and as AI agents become mainstream, the demand for AI computing will accelerate,” he said.
Comparing the importance of AI chips to a nation’s electricity supply, he added: “Countries around the world are recognising AI as essential infrastructure – just like electricity and the internet – and Nvidia stands at the centre of this profound transformation.”
But US tariffs may curb demand, according to Forrester’s senior analyst Alvin Nguyen: “If trade negotiations are not resolved soon, expect to see tariffs impact demand for AI infrastructure – this may not impact Nvidia immediately, but could slow overall AI demand if uncertainty about product costs linger.”
Given that AI chips are already expensive products, which are set to get more expensive as tariffs take effect, Nguyen added: “The longer it takes to negotiate stable trade agreements, the more it could impact purchasing decisions from AI infrastructure to AI factories due to the potential cost implications.”
