Nvidia will lose more than $10 billion in revenue after the United States halted sales of a chip it designed exclusively to get around export controls.

Jensen Huang, co-founder and CEO of Nvidia Corp., speaks during a news conference in Taipei on May 21, 2025. Huang said that US export controls on artificial intelligence chips to China had failed, with companies using locally developed technology. (Photo by I-Hwa Cheng / AFP) Photo by I-HWA CHENG/AFP via Getty Images

Austin Alonzo

Reporter

 

Nvidia Corp., the most valuable semiconductor company in the world, is facing billions in lost revenue after U.S. export controls forced the tech giant to halt shipments of one of its key products to China.

In its May 28 earnings report, Nvidia announced a multi-billion-dollar write-off tied to its China-specific H20 graphics processing unit. The chip was explicitly designed to comply with prior rounds of U.S. restrictions. The U.S. government informed Nvidia in April that the H20 no longer met its export requirements. This effectively shut the door on what had been a vital market for the company.

Before the halt, according to Nvidia’s most recent financial statements, the Santa Clara, California-based company had sold more than $4.6 billion worth of H20 chips in just three months, from late January to April. Now, however, the company’s executives say they think the $50 billion opportunity in China’s AI accelerator market is largely out of reach.

U.S. policy aimed at restricting the flow of advanced technology to China is supported by both sides of the political aisle.

Starting in 2018, the first Trump administration began to take steps to slow the flow of components needed to manufacture advanced computer chips to China. During the Biden era, a Democratic Party-controlled Congress passed the CHIPS Act, which put formal limitations on exporting finished chips to China.

While the two parties differ on many points of foreign policy, they agree that keeping advanced American technology out of the hands of the Chinese communist regime is essential to national security.

A $10 Billion Decision

Nvidia, one of the highest-earning companies in the world, calculated that the total foregone revenue attributable to the H20 export control will be about $10 billion.

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According to a company statement issued along with its latest earnings release, in April the company was “informed by the U.S. government” that it could no longer sell technology using the chip in China.

In the statement, the company said it halted the shipment of an additional $2.5 billion worth of the products after it was told to stop selling them.

Representatives of Nvidia declined to comment further beyond what company executives said in the May earnings call.

On that call, Nvidia CEO Jensen Huang was highly critical of the United States’ latest push to block the company from selling advanced technology to Chinese customers, saying he believes it could spur both the development of Chinese high technology, and decrease foreign reliance on American innovation.

Nvidia CFO Colette Kress said the company had expected to make another $8 billion worth of H20 sales by the middle of 2025.

Even with the H20 setback, Nvidia still announced a quarterly revenue of about $44.1 billion and a quarterly net income, or profit, of about $19.9 billion. Both were significant increases over the company’s financial performance in the same quarter of the previous year.

Wall Street was unfazed by the development. The price of Nvidia stock has risen by about 4 percent since May 28.

In line with prevailing expectations that Nvidia will continue to soar as customers around the world gobble up their products, analysts at Wedbush Securities said they still hold the company’s stock in high regard. The only reason to question its ongoing dominance would be any other policy decisions that could slow its momentum.

“Political decisions—AI diffusion, tariff, and China policies—are seemingly the only potential significant stumbling blocks,” Matt Bryson, a senior equity research analyst at Wedbush, and Antoine Legault, a senior equity research associate at Wedbush, said in a May 29 note.

Resisting China’s AI Rise

The H20 case is not the first time Nvidia has built a slightly lower performance chip to meet new export controls and satisfy China’s appetite for advanced processors. The April sales halt was the second time in the past five years that the U.S. government stopped the company from selling AI technology to China.

In an April 29 report, Lennart Heim, an associate information scientist at the Rand Corp., said both the first Trump administration and the Biden administration recognized the growing risk of selling advanced technology to China.

During President Donald Trump’s first presidency, his Cabinet made moves to limit the export of extreme ultraviolet lithography equipment—essential in chipmaking—to China. In 2022, Congress passed the CHIPS and Science Act, which imposed new restrictions on the sale of high-performance chips and the equipment used to manufacture them to China.

Nevertheless, Heim said, Nvidia took advantage of a loophole in the CHIPS Act to “slightly modify existing chips” and create the so-called A800 and H800 chips it could freely sell in China. Those chips, he said, directly enabled the creation of the DeepSeek-R1 model that powers the company’s generative AI tools.

Ultimately, Heim said, Nvidia had to be stopped from selling the A800 and H800 chips to China, just as it did with H20. Even then, the damage has been done, he said.

“In every case: too little, too late,” Heim said.

Moreover, Chinese entities have likely smuggled millions of advanced chips into the country and have used proxy companies to circumvent export controls and buy the tools necessary to make advanced chips. These maneuvers, Heim said, have allowed the Chinese communist regime-backed technology company Huawei to greatly advance its own AI chip manufacturing capabilities.

Huawei CEO Ren Zhengfei told Chinese state media on June 10 that his company is spending as much as $25 billion a year on improving its chip manufacturing. However, in the same interview, he admitted Chinese technology is one generation behind products sold by leading U.S. firms like Nvidia.

“The United States has exaggerated Huawei’s achievements. Huawei is not that great,” Ren told CCP state media. “We have to work hard to reach their evaluation.”

 

Profit Versus Patriotism

Bryan Burack, a senior policy advisor at the Heritage Foundation, said the H20 sales stoppage shows that the U.S. government won’t continue to let Nvidia follow the letter of the law while ignoring the intent. The spirit of the export controls is to keep America’s most advanced technology out of the hands of a foreign adversary, he told The Epoch Times.

Burack, who focuses on China and the Indo-Pacific region, said the new export control aimed at H20 sales tells Nvidia, as well as all technology companies in the United States, that the federal government requires American companies to “act in line with the national interest.”

This is consistent, Burack said, with the more aggressive foreign policy stance toward China that was loudly adopted by the first Trump administration and quietly followed by the Biden administration. Recent developments in regards to the trade relationship between the United States and China are evidence, he said, that the current Trump administration will only turn up the pressure on China.

Right now, Burack said, U.S. policy is based on keeping the Chinese communist regime from acquiring advanced technology that it could use to both enhance its military capabilities, and grow its surveillance state.

In his commentary, Huang said that U.S. policy is based on the faulty assumption that China cannot make AI chips. Therefore, he said, export policy should be focused on strengthening U.S. platforms and getting the world’s AI technology to build on American hardware.

“You don’t really hear anybody arguing that we should sell ballistic missiles to Iran or North Korea so we can retain market share in those emerging markets,” Burack said in response to that line of reasoning. “But for some reason that logic is not being applied to dual-use AI.”

At the same time, Burack said, the contention that the world’s AI developers will abandon American technology for Chinese technology is fallacious. China simply doesn’t have hardware that can compete with chips designed by American companies.

 

The Battle for AI Dominance

The export controls were the “end of the road” for H20, Huang said during the latest Nvidia earnings call, but the company is still considering developing new products that it can sell in China.

China is still a very appealing market for Nvidia, Kress said. In the earnings call she told investors Nvidia sees a $50 billion opportunity in the country. She said losing access to the country’s “AI accelerator market” would hurt Nvidia’s business at the benefit of “foreign competitors in China and worldwide.”

Export controls aren’t going to stop China from getting AI or making AI advances, Huang said. It already has the technology and it is deploying it.

This was evidenced by the surprising debut of DeepSeek’s large language model-powered chatbot on Android and Apple devices in January. The appearance of an open-source, Chinese-made generative AI assistant raised serious questions about the previously unchallenged American dominance of AI development.

In January, the Biden administration’s Department of Commerce issued the so-called AI Diffusion Rule that totally blocked the sale of AI chips to China, Russia, Iran, and North Korea. However, on May 13 the current Department of Commerce rescinded the rule. In the release, Jeffery Kessler, the under secretary of commerce for industry and security, called the Biden-era controls “ill-conceived and counterproductive.”

In the same statement, a replacement rule was promised.

Representatives of the Department of Commerce did not respond to a request for comment on the future of the measure.

Kessler appeared before the House Foreign Affairs Committee, South and Central Asia subcommittee on June 12. During that testimony, he did not reveal the promised replacement of the Biden administration’s AI diffusion rule, but he did say he believes that export controls the United States has imposed on China are effectively limiting technological and military advances in Beijing.

Right now, Chinese manufacturers cannot produce more than 200,000 advanced AI chips in 2025, which is far below demand.

“China is investing huge amounts to increase its AI chip production, as well as the capabilities of the chips that it produces,” Kessler said. “It’s critical for us not to have a false sense of security.

“China is catching up quickly,” Kessler said.

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