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Nvidia’s stunning earnings performance is clouded by a growing geopolitical storm. CEO Jensen Huang has openly criticized U.S. export controls that have blocked AI chip sales to China—a market once worth over $50 billion annually. The ban led to $2.5 billion in missed revenue in just one quarter and $4.5 billion in written-off inventory. As Nvidia’s China ambitions stall, rivals like Huawei are stepping up, marking a pivotal moment in the global AI arms race.

Key Takeaways:

• Nvidia’s Q1 FY2025 revenue hit $44 billion—a 69% increase YoY—but could’ve been $2.5 billion higher without the China ban.
• The company had to write off $4.5 billion in unsellable inventory, mostly its H20 AI chips.
• $8 billion in planned orders for China in the current quarter are now canceled.
• CEO Jensen Huang warns that China will advance its AI industry regardless, potentially with homegrown alternatives.
• Export restrictions are not just hurting Nvidia—they’re changing the global tech landscape.

Export Ban: The $50 Billion Market Nvidia Can’t Access

In Nvidia’s latest earnings call, CEO Jensen Huang didn’t mince words. The U.S. government’s recent export restrictions have, in his words, “effectively closed” the Chinese market to American AI chipmakers. This decision led Nvidia to miss out on $2.5 billion in potential revenue during the fiscal Q1 alone.

The restrictions were triggered in April 2025 when the Trump administration retroactively required an export license for Nvidia’s H20 processor—a chip previously cleared for the Chinese market. That decision left no grace period, immediately halting sales.

China is the world’s second-largest economy and represents over $50 billion in potential market value for AI chips. That market is now off-limits, significantly impacting Nvidia’s global strategy and bottom line.

Billions in Inventory Lost and Orders Canceled

The consequences were immediate and massive. Nvidia disclosed that it had to write down $4.5 billion in inventory—primarily unsellable H20 chips stockpiled for Chinese clients. Furthermore, the company now has to cancel $8 billion worth of scheduled orders for the upcoming quarter, leaving a significant dent in future revenue projections.

Despite this, Nvidia still guided for $45 billion in revenue for the current quarter, but without the export ban, this number could have been closer to $53 billion—an 18% increase.

China’s Response: A Shift Toward Self-Reliance

Jensen Huang warned that these restrictions could backfire on the U.S. more broadly. He believes China will rapidly accelerate its domestic AI chip development, with major players like Huawei stepping in to fill the vacuum. The notion that China can’t produce advanced AI chips is, according to Huang, outdated and “clearly wrong.”

“The question is not whether China will have AI,” said Huang. “It already does.”

Indeed, China’s Semiconductor Manufacturing International Corporation (SMIC) and other firms have been ramping up investment in domestic semiconductor design and manufacturing. Analysts expect China’s AI chip output to grow by 25–30% annually, as the country shifts focus from imports to indigenous innovation.

A Diplomatic Balancing Act: Huang’s Tightrope

While Huang was critical of the policy impact, he avoided direct confrontation with President Trump. Instead, he praised the administration for rescinding the controversial "AI diffusion" rule and for championing initiatives that encourage domestic chip manufacturing. He even noted that Nvidia is expanding U.S.-based production in alignment with national goals.

“The president has a plan,” Huang added. “He has a vision, and I trust him.”

Still, Huang admitted that Nvidia has no replacement chip designed for China under the new rules and doesn’t expect policy relief in the near term. The export limits, he said, are “quite stringent,” leaving little room for maneuvering.

Looking Ahead: Can Nvidia Keep Its Momentum?

Despite the China fallout, Nvidia’s stock is soaring. The company’s share price jumped 4% in after-hours trading, adding to its remarkable performance—up over 240% in 2023 and 170% last year. Investors remain bullish on Nvidia’s dominant position in AI hardware, especially in markets like the U.S., Europe, and the Middle East.

However, as the AI hardware race globalizes, Nvidia faces increasing pressure from both policy and competition. Countries like China, Saudi Arabia, and the UAE are investing billions in building domestic data centers and AI capabilities, often without U.S. tech.

If export restrictions continue, Nvidia might not only lose access to China, but also face long-term strategic disadvantages in the global AI race.

A Wake-Up Call for U.S. Tech Policy

The Nvidia-China episode underscores a growing dilemma: How does the U.S. balance national security with economic innovation? While protecting intellectual property and national interests is critical, Jensen Huang's warning is clear—if the U.S. retreats, others will fill the void.

As AI becomes the centerpiece of future global economies, the consequences of shutting out key markets could reshape the competitive tech landscape for decades to come.