Nvidia (NVDA) has been in full focus since it reported impressive Q1 earnings, but that doesn’t mean the chipmaker isn’t facing some significant problems.
For weeks, investors waited patiently to learn how the artificial intelligence (AI) leader had fared during the year’s turbulent first quarter. After watching NVDA stock battle volatile market conditions for months, some experts raised questions as to its financial prospects.
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Nvidia reported overall mixed earnings for Q1, topping Wall Street estimates on several key metrics but coming up short in other areas. However, the consensus among analysts seems to be that the results are encouraging enough for investors to proceed with optimism that the chipmaker’s growth will continue.
That said, the company recently revealed another important update, one that highlights a potential problem for both its business and the broader chipmaking industry.
Nvidia CEO Jensen Huang recently raised concerns about a new trade policy that impacts his company.
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Nvidia’s post-earnings glow may not be destined to last
Since the launch of ChatGPT in 2022, the AI market has grown quickly, and many investors have zeroed in on Nvidia as the undisputed leader. The company has benefited significantly from this, rising steadily as global demand for its graphics processing units (GPUs) has trended upward, despite their high prices.
Related: Nvidia CEO sounds the alarm on Chinese rival
However, in January 2025, the rise of a Chinese AI startup called DeepSeek triggered a massive chip stock selloff when the company released an AI model built on less advanced Nvidia chips. While NVDA stock ultimately recovered, this development called its growth prospects into question.
Nvidia’s recent earnings report likely assuaged the fears of some investors, but it also uncovered something concerning. In a statement on these fiscal results, the company revealed that on April 9, it learned the U.S. government would require a license to export its H20 chip to China.
“As a result of these new requirements, NVIDIA incurred a $4.5 billion charge in the first quarter of fiscal 2026 associated with H20 excess inventory and purchase obligations as the demand for H20 diminished,” Nvidia states. “Sales of H20 products were $4.6 billion for the first quarter of fiscal 2026 prior to the new export licensing requirements.”
The company also shared that due to this new policy, it had been rendered unable to ship an additional $2.5 billion worth of H20 products during Q1. On top of that, Nvidia said it expects the H20 licensing requirement to result in an $8 billion revenue hit during Q2, which it projects to be roughly $45 billion.
Nvidia CEO Jensen Huang addressed the major problem posed by losing part of the Chinese market.
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An outspoken advocate of reducing trade restrictions for companies in his industry, he stated, “The $50 billion China market is effectively closed to us. The H20 export ban ended our Hopper data center business in China. We cannot reduce Hopper further to comply.”
Huang also made it clear that whichever company wins China’s market will likely be in the best position to lead the global AI arms race. He seems to see Nvidia’s chances as being severely compromised if the licensing requirements remain in place.
This news has major implications for AI policy
While this development is certainly bad news for Nvidia, it reveals an important factor for investors to consider. Both President Donald Trump and Vice President JD Vance have stressed the need for less regulation on the AI industry, making it clear they want to help American companies achieve global AI dominance.
Related: Nvidia CEO shares blunt message on China chip sales ban
Now, however, this licensing requirement stands to compromise Nvidia’s quest to continue selling a popular chip in China, a market the company does not want to lose. Chinese tech leaders such as Huawei are working hard to produce GPUs that can compete with Nvidia’s. Now the AI leader is at even greater risk of being pushed out of the Chinese market.
A Taiwanese publication recently reported that both Nvidia and Advanced Micro Devices (AMD) , a rival in the AI chipmaking space, are likely to start producing new chips to sell in China in an attempt to comply with the U.S.’s restrictions.
Even if Nvidia can successfully market and sell this new chip in China, that doesn’t mean it will be able to recoup the losses it has suffered due to the new licensing restrictions. As Huang notes, China’s market is critical to the success of any chipmaker, and Trump’s new policies are making it increasingly less accessible.
Related: Fund manager has extremely blunt words on China tariff news
