You’re seeing the actual cost of tighter chip export rules. Nvidia has reported a major financial hit in the first quarter of its 2026 fiscal year, which ended on April 28. The damage comes from new licensing requirements that stop the company from selling its H20 AI chips to businesses in China.
In its latest earnings report, Nvidia confirmed that it recorded a US$4.5 billion charge during Q1. This figure is linked directly to the US government’s decision to restrict chip sales to China. The company also noted that it was unable to ship H20 chips worth US$2.5 billion during the quarter because of the same restrictions.
When these licensing rules were first announced in April, Nvidia had already warned that it expected to see a total US$5.5 billion hit for the quarter. Now, with the official figures out, the picture is becoming clearer—and it’s not a pretty one.
Losses expected to grow in the next quarter
The bad news doesn’t end with Q1. Nvidia expects an even bigger revenue loss in the next quarter. The company believes it will lose around US$8 billion in potential sales in Q2, mainly because of the continued block on H20 chips.
For context, Nvidia’s predicted total revenue for Q2 is about US$45 billion. So, this loss represents much of what the company hoped to earn.
In a call with investors, Nvidia CEO Jensen Huang admitted the company is still figuring out how to stay active in China’s AI market. He said that Nvidia has little choice but to write off its H20 chip inventory meant for Chinese buyers.
“China is one of the world’s largest AI markets,” Huang said. “Half of the world’s AI researchers are based there. The platform that leads in China is set to lead globally. But the US$50 billion China market is now basically closed to us.”
He added that the US export ban has effectively ended Nvidia’s data centre business in China, which used the H20 chip, which is part of its Hopper platform. According to Huang, there is no way to modify the chip further to meet current export rules.
Ongoing disagreement with US government policies
Nvidia has been open in its criticism of the US government’s restrictions. The company believes that these rules are doing more harm than good. In particular, Nvidia disagrees with the Trump administration’s approach to limiting exports of high-end AI chips to China.
However, Huang did welcome the Biden administration’s recent move to cancel a proposed Artificial Intelligence Diffusion Rule. Had it gone ahead, this rule would have imposed even stricter limits on chip exports.
Even so, the company knows that its business is already affected by the existing restrictions during the Trump era. “The question is not whether China will have AI; it already does,” Huang said. “The question is whether one of the world’s largest AI markets will run on American platforms.”
He also warned that blocking US chipmakers from selling to China only helps local Chinese companies grow stronger, which could eventually weaken America’s global tech leadership.
