TLDR;
- Nvidia posted a strong Q1 with $44.06 billion in revenue and $18.8 billion in net profit.
- CEO Jensen Huang warned export bans are shutting Nvidia out of China’s $50 billion AI chip market.
- The company lost $7 billion in the quarter due to U.S. restrictions on high-end chip sales to China.
- Despite geopolitical challenges, Nvidia’s cutting-edge AI tech is driving global demand.
Nvidia delivered a blockbuster earnings report for the first quarter of its fiscal year Thursday, with revenue reaching $44.06 billion, well above the $43.31 billion forecast by analysts.
The company’s earnings per share came in at $0.96, and net profit soared to $18.8 billion. Shares rose 5% in after-hours trading, as investors cheered the strong results.
But even as Nvidia cements its lead in AI hardware, CEO Jensen Huang raised red flags about growing trade restrictions that could undercut future growth, particularly in China, the world’s second-largest economy.
China’s Bans Cost Nvidia Billions
Huang didn’t mince words during the earnings call. He revealed that U.S. government restrictions on high-performance chip exports to China, especially the H20 chips, have effectively ended Nvidia’s data center business in the region.
“We estimate that the export ban on H20 alone cost us $4.5 billion in excess inventory and $2.5 billion in missed sales,” Huang said. “The $50 billion Chinese AI market is now essentially closed to American industry.”
The company had previously dominated China’s data center chip market, but the void is now being filled by domestic players such as Huawei, whose latest AI chip rivals Nvidia’s H200 in performance.
Low-Cost Chips for China
Despite the restrictions, Nvidia isn’t backing away from the Chinese market entirely. Huang confirmed that the company is working on a new, lower-spec AI chip designed to comply with U.S. export laws and maintain some presence in China.
“China is not just one of the largest AI markets; it’s also where half the world’s AI researchers are based,” Huang said. “Winning in China can translate to global leadership.”
Yet challenges remain. Chinese regulators are investigating whether Nvidia’s compliance with U.S. export laws unfairly disadvantages domestic customers. A ruling against Nvidia could result in fines or further operational restrictions.
The Bigger Picture
While much of the media spotlight remains on export bans, analysts like Kevin Cook of Zacks Investment Research argue that the real story is Nvidia’s leadership in next-generation AI infrastructure.
In Q1, the company began shipments of its GB200 NVL72 exascale supercomputer-in-a-rack. Each unit contains 72 GPUs and carries a price tag of around $3 million. If Nvidia ships just 5,000 units in Q2, that could generate $15 billion in revenue.
“Exascale computing allows for ultra-large-scale AI model training, accurate climate simulations, and breakthroughs in biomedicine,” Cook said. “That’s where the real long-term value lies.”
Trade Court Rulings Add to Uncertainty
Notably, Nvidia isn’t the only company affected by the growing trade war. Shares in Cadence and Synopsys tumbled over 10% after reports emerged that the White House banned their software from being sold to China. HP also cited trade-related pressures in its latest outlook.
Meanwhile, a U.S. trade court recently struck down several tariffs imposed under former President Donald Trump, ruling that the executive branch overstepped its authority. The decision could reshape the broader trade policy landscape, but the Biden administration has yet to signal whether it will take a different path on tech exports.
Looking Ahead
For now, Nvidia remains in a strong position, driven by insatiable global demand for AI computing. But Huang’s warnings are a reminder that technological dominance can’t be separated from geopolitical realities.
“Innovation is not enough,” Huang concluded. “We also need access.”
