Nvidia has revealed deep financial setbacks linked to the United States government’s chip export rules during the first quarter of its 2026 fiscal year. The company reported a charge of four and a half billion dollars tied to licensing requirements that curb sales of its H20 artificial intelligence chip to customers in China.
These restrictions also blocked an additional two and a half billion dollars in expected H20 revenue for the quarter as Nvidia was unable to ship those chips. A previous forecast from April anticipated charges reaching five and a half billion dollars in relation to American export controls on semiconductors.
Impact on China’s AI Market
Looking ahead, Nvidia projects the ongoing licensing demands will drain eight billion dollars from its revenue in the second quarter, which is forecast to total around forty five billion dollars. The company’s first quarter earnings call featured CEO Jensen Huang, who acknowledged that Nvidia is examining new strategies to remain competitive in China’s artificial intelligence sector.
Right now, though, Nvidia must account for the loss tied to its unsold H20 products. “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,” Huang said during the call.
He added that the China market, valued at approximately fifty billion dollars, “is effectively closed” to Nvidia, pointing out that export controls shut down the company’s Hopper data center business in the country. Huang noted that Nvidia cannot scale back Hopper chips any further to meet regulatory demands.
The company has repeatedly voiced concerns over limits on the sale of American made AI chips to foreign markets like China. Huang applauded the White House for scrapping a proposed policy from the prior administration that would have created even tougher restrictions on chip exports.
Although more stringent measures from the current administration did not materialize, Nvidia’s earnings report underscores that previous rules continue to inflict substantial wounds on the chipmaker’s business in China. “The question is not whether China will have AI; it already does,” Huang said during the call, “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.”
