Nvidia faces $8 billion loss due to U.S. restrictions on chip sales to China

In response to increased U.S. export restrictions, Nvidia is facing unprecedented challenges in the Chinese market as of late May 2025. The U.S. government has imposed stringent rules preventing Nvidia from selling its H20 chip designed specifically for China, resulting in a historic $5.5 billion write-down on inventory. These restrictions have cut Nvidia’s market share in China from 95% to just 50%, and the company anticipates losing $8 billion in sales this quarter—an alarming figure that highlights the potential for severe revenue declines. The U.S. restrictions stem from concerns that advanced AI chips could be repurposed by adversaries for military use. Nvidia’s CEO, Jensen Huang, has voiced serious concerns about the rising capabilities of Chinese AI technology and the adverse effects of being locked out of the market. As U.S. companies withdraw, local firms are rapidly advancing, threatening to fill the technological gaps left by the likes of Nvidia. Notably, Chinese company Huawei is emerging as a formidable competitor, revealing AI chips that rival Nvidia’s H200. In an effort to advocate for easing export restrictions, Huang contends that these actions are counterproductive. U.S. policy is inadvertently prompting Chinese engineers to innovate and create their own processors, which may ultimately enhance China’s AI semiconductor ecosystem. This situation underscores a critical need for Nvidia to regain its footing in a crucial market teeming with AI talent. Huang’s remarks express the urgency of maintaining access to the diverse population of AI researchers in China and the potential risks posed to U.S. technological dominance. The ongoing dynamic between U.S. policies and Chinese technological advancements presents a significant dilemma for Nvidia. While the company has managed to sustain growth largely driven by sales of graphics processors used for AI infrastructure, the outlook heading into the quarter's earnings report appears troubled. Analysts highlight that while Nvidia expected some level of adherence to restrictions, the abrupt changes have taken the company by surprise, revealing a potential underestimation of the impact of these restrictions prior to their implementation.