NVIDIA Battles Export Controls with 69% Revenue Surge Despite $80 Billion Risk

NVIDIA, a leading manufacturer of graphics processing units (GPUs) and AI computing platforms, is facing significant challenges amidst tightening export controls. The company warned that these restrictions may lead to a substantial $80 billion revenue loss due to limitations on its high-tech product sales, particularly its H20 AI chips, to China. This move is a part of broader U.S. government efforts to limit the transfer of cutting-edge technology.

Despite the hurdles, NVIDIA's first quarter report for the fiscal year 2026 indicates resilience. The company reported a 69% year-on-year revenue growth, reaching $441 billion, driven prominently by a 73% increase in data center revenue. As predicted, the burgeoning AI market, especially in U.S. domestic sectors, spurred these gains, though expectations for the upcoming quarters are tempered by anticipated losses from export controls.

The implementation of new export restrictions necessitated NVIDIA to account for a $4.5 billion expense in surplus inventory and procurement commitments related to its H20 chips that were barred from sale. This situation has eroded their earnings by preventing the potential $2.5 billion revenue booking from H20 sales in the previous quarter.

CEO Jensen Huang emphasized the critical nature of engaging with the Chinese market, underscoring the flawed assumption that China could not develop its AI chips independently. He highlighted the importance of leveraging NVIDIA's technologies in global AI platforms, warning that these barriers could risk diminishing the U.S. foothold in the AI sector.

Looking forward, NVIDIA estimates second quarter revenues around $45 billion, adjusted for an $80 billion loss attributed to these export controls. Despite the setbacks, the company remains committed to maintaining its gross margins between 71.8% and 72.0%, and mitigating impacts through strategic adjustments and exploring diverse international markets to compensate for the restrictions.

The U.S. tightening of export policies has clearly dented NVIDIA's market access in China, forcing the company to reassess its market strategies and innovation pathways. As global supply chain dynamics continue to evolve, NVIDIA's ability to innovate while navigating regulatory landscapes will be critical in sustaining its leadership in the semiconductor industry.