Record Revenue, Billions Lost in China—How Long Can Nvidia Defy Gravity?

Nvidia delivered another record quarter with $44.1 billion in revenue, up 69% from last year. But the AI chip giant also revealed the steep cost of being shut out of China—$4.5 billion in charges this quarter alone.

The company beat Wall Street estimates for revenue but fell short on profit. Net income rose 26% to $18.8 billion, below the $19.5 billion analysts expected. The shortfall came from inventory write-offs related to H20 chips that can no longer be sold to Chinese customers.

The Trump administration told Nvidia in April that it needed export licenses to sell H20 processors to China. These chips were designed specifically for the Chinese market. Nvidia couldn't ship an additional $2.5 billion worth of H20 revenue in the quarter because of the restrictions.

CEO Jensen Huang didn't mince words about the policy impact. He called the $50 billion Chinese AI market "effectively closed" to American companies. China's share of Nvidia's revenue has dropped from 21% two years ago to just 13% today.

"The platform that wins China is positioned to lead globally," Huang said on the earnings call. "Shielding Chinese chip makers from U.S. competition only strengthens them abroad and weakens America's position."

The restrictions will cost Nvidia another $8 billion in lost revenue next quarter. The company expects $45 billion in sales for the current period, slightly below analyst estimates of $45.8 billion.

Data Center Dominance Continues Despite Headwinds

Despite the China headwinds, Nvidia's core business remains strong. Data center revenue jumped 73% to $39.1 billion, accounting for 88% of total sales. This division alone is larger than most chip companies' entire operations.

Gaming delivered a surprise boost with $3.8 billion in revenue, up 42% and well above the $2.85 billion analysts expected. The new Blackwell gaming chips helped drive the record quarter. CFO Colette Kress called it "a home run."

Automotive revenue rose 72% to $567 million, while professional visualization grew 19% to $509 million.

Middle East Deals Replace China Losses

Nvidia has found some offset to China losses through Middle East deals. The company struck partnerships with Saudi Arabia and the UAE to build AI infrastructure. These "sovereign AI" projects show countries want their own computing power rather than relying on others.

The broader AI spending boom continues. Microsoft, Amazon, Google, and Meta plan to spend a combined $345 billion on AI infrastructure this year, up 41% from last year. This demand keeps Nvidia's production lines busy.

Blackwell Chips Drive Future Growth

The company is ramping up its newest Blackwell chips rapidly. Cloud providers deploy about 72,000 Blackwell processors each week at more than $30,000 per chip. Analysts expect Blackwell to generate nearly $98 billion in sales this fiscal year.

Huang travels constantly now, meeting world leaders to secure chip deals. He plans to visit Europe next week. The CEO has become something of a tech diplomat, cementing Nvidia's position as the gold standard for AI processors.

Chinese Regulators Push Back

Chinese regulators are now investigating whether Nvidia's compliance with U.S. export controls unfairly discriminates against Chinese customers. This stems from commitments Nvidia made when it bought networking company Mellanox in 2020. The company warned it could face penalties if regulators conclude it violated Chinese law.

Nvidia's stock rose 4% in after-hours trading. The company's $3.3 trillion market value now ranks second globally, ahead of Apple and behind only Microsoft. Shares have gained 18% since reports emerged that the Trump administration would roll back some Biden-era export restrictions to other countries.

The earnings showed both Nvidia's strength and its vulnerability to geopolitics. The company controls about 90% of the AI accelerator market, a position that has driven its value from $27 billion to nearly $200 billion in annual sales in just two years.

But trade wars can quickly reshape that landscape. Nvidia went from holding 95% market share in China four years ago to just 50% today. The latest restrictions could push that even lower.

For now, demand elsewhere compensates for China losses. AI infrastructure spending shows no signs of slowing as companies race to build smarter systems. Nvidia sits at the center of this transformation, providing the computing power that makes modern AI possible.

The question is whether geopolitical tensions will eventually constrain this growth. Huang clearly believes export controls hurt American interests more than they help. But policy makers see AI chips as too strategically important to let adversaries access freely.

This tension between business opportunity and national security concerns will likely define Nvidia's next chapter. The company has built the most valuable business in tech by selling to anyone who wants AI computing power. Now it must navigate a world where governments increasingly decide who gets access to that power.

Why this matters:

• China's loss becomes everyone else's gain - While Nvidia loses $8 billion in Chinese revenue next quarter, Middle East sovereign AI deals and continued U.S. tech giant spending show demand simply shifts rather than disappears.
• Export controls are reshaping the global AI landscape - Nvidia's China market share fell from 95% to 50% in four years, proving that trade restrictions can quickly fragment tech dominance and accelerate competitor development.