Nvidia Faces Billions in Revenue Loss Due to H20 Chip Export Licensing Restrictions in 2025

In a significant setback for tech giant Nvidia, the company has announced an expected loss of billions in revenue due to stringent licensing requirements imposed on its H20 AI chips. These restrictions, primarily affecting exports to China, have forced Nvidia to take a substantial financial hit in the first quarter of fiscal year 2026.

According to recent reports, Nvidia incurred a $4.5 billion charge in Q1 related to unsold inventory and canceled contracts for the H20 chips. Additionally, the company reported a $2.5 billion loss in unshipped revenue, bringing the total impact to a staggering $7 billion for the quarter. Nvidia also anticipates an even larger $8 billion sales loss in Q2 due to these export bans.

The U.S. government's decision to impose these licensing requirements stems from national security concerns, effectively closing off a key market for Nvidia. CEO Jensen Huang criticized the policy, calling it a failure and noting that China, once a dominant market for Nvidia with a 95% share, has seen the company's presence drop to just 50%.

Despite the revenue losses, Nvidia's core business in AI and gaming remains strong, with Q1 FY2026 revenue hitting a record $44.1 billion. However, the export restrictions have undeniably impacted profit margins and raised concerns about long-term growth in international markets.

Huang emphasized that China would likely move forward with alternative solutions, with or without Nvidia's technology. This shift could further erode Nvidia's dominance in the region as competitors step in to fill the gap created by the export curbs.

As Nvidia navigates these challenges, the company is reportedly exploring options like launching a cheaper Blackwell AI chip tailored for the Chinese market. Whether this will mitigate the financial damage remains to be seen, but for now, the licensing requirements on H20 chips represent a major hurdle for the tech leader.