Nvidia has reported significant financial setbacks in its Q1 fiscal year 2026 earnings, primarily due to new U.S. export restrictions targeting its H20 AI chips. The company revealed a $4.5 billion charge in the first quarter, ending April 28, stemming from licensing requirements that have limited its ability to sell the H20 chip in China. Additionally, Nvidia was unable to ship another $2.5 billion worth of H20 inventory during the same period.
When the Trump administration’s export controls were first announced in April, Nvidia had projected $5.5 billion in related Q1 charges. However, the financial impact appears even more severe moving forward. The company now expects an $8 billion revenue hit in Q2 alone, from what it estimates will be a $45 billion quarter.
During Wednesday’s earnings call, CEO Jensen Huang expressed concern about the long-term implications of the restrictions, particularly in China — a key AI market. “China is one of the world’s largest AI markets… The platform that wins China is positioned to lead globally,” Huang stated. He noted that the H20 export ban effectively ended the company’s Hopper data center business in China, and further reductions to meet compliance are no longer feasible.
Huang also criticized the Trump-era export policies, warning that isolating China from U.S. chip technology could backfire. “The question is not whether China will have AI; it already does,” he said. “Shielding Chinese chip makers from U.S. competition only strengthens them abroad and weakens America’s position.”
Although the Biden administration recently scrapped a proposed Artificial Intelligence Diffusion Rule that would have introduced even stricter export limitations, Nvidia remains vulnerable to existing regulations. The company is now exploring alternative strategies to maintain its presence in China’s $50 billion AI market — despite the current restrictions that continue to undermine its global growth potential.
