Jensen Huang, co-founder and CEO of Nvidia Corp., speaks during a news conference in Taipei on May 21, 2025.
I-hwa Cheng | Afp | Getty Images
Nvidia continues to see massive growth from sales of graphics processors, with demand for artificial intelligence infrastructure showing no signs of cooling.
But for the AI chipmaker, the mood is different heading into Wednesday’s earnings report than it’s been in recent quarters. There’s one big reason why: China.
On April 9, the Trump administration sent Nvidia a letter, and said it was requiring an export license for the company’s H20 chip, a version of its Hopper processor specially designed for the Chinese market to comply with previous U.S. restrictions.
Dating back to President Joe Biden’s term, the U.S. government has been concerned that AI chips from Nvidia and other semiconductor companies like Advanced Micro Devices can be used to create supercomputers for adversaries’ military purposes.
Following the new restrictions, Nvidia said it would take a $5.5 billion write-down on inventory. Analysts called it the biggest write-down in the history of the chip industry. The potential impact on future revenue is hefty.
“This inventory write-off implies a $15 billion H20 revenue hit on a rolling 12-month basis,” wrote David O’Connor, an analyst at BNP Paribas, in a report Tuesday.
For the quarter ended in April, analysts expect Nvidia to post 66% revenue growth to $43.28 billion, according to LSEG. While that level of growth is much higher than the kind of expansion at any of Nvidia’s megacap peers, it marks a sharp deceleration from a year ago, when the company recorded growth of more than 250%.
Because of the new export license requirements, there’s a lot of uncertainty surrounding projections for the rest of the year. The average analyst estimate is predicting growth in the current quarter of 53%, with similar a number expected for the full fiscal year, which ends in January.
Morgan Stanley analysts wrote in a report Tuesday that Nvidia faces a bigger hit than expected.
“While our thinking at the time was that this was at least partly expected by the management team, it became clear after the ban that the company had been getting indications that H20 would be OK, and that they were materially surprised,” the analysts wrote.
Nvidia shares have bounced back of late after a rough start to the year and are now up about 1% in 2025, while the Nasdaq is down about 1%.
Earlier this month, Nvidia CEO Jensen Huang said in Taiwan that Nvidia used to have 95% market share of graphics processing units in China, but it’s been cut to 50% under chip restrictions. In a filing with the Securities and Exchange Commission in February, Nvidia said it recorded $17.1 billion in annual sales to customers that had an address in China, including Hong Kong, the company’s fourth-largest market.
Huang has contended in recent weeks that restricting the export of Nvidia’s chips to China will only motivate engineers there to come up with their own processors, bolstering the country’s AI semiconductor ecosystem and further threatening U.S. technological leadership.
Nvidia got some good regulatory news in May, when the Trump administration announced it was rescinding the “AI diffusion rule,” which entailed even more restrictions on exporting AI chips to China and other countries. Nvidia and AMD opposed the restrictions.
However, the Trump administration didn’t entirely back away from regulating Nvidia’s exports, saying at the time that it was planning a new, simpler replacement for the diffusion rule.
Morgan Stanley analysts expect questions to remain about Nvidia’s replacement H20 and its plans for China well after this week’s earnings report. They noted that Nvidia is lobbying for licenses to ship the H20, which can be granted under the current system.
“There is a conversation to be had about what will eventually be allowed in China — but probably not on this earnings call,” they wrote.
