Nvidia is set to release its first-quarter earnings report, and the financial ramifications of U.S. export limits on its sales to China will be a central focus. The Trump administration’s ban on the H20 chip has created a significant economic toll, with Nvidia already anticipating a $5.5 billion charge and CEO Jensen Huang acknowledging a $15 billion walk-away from potential China sales.
This substantial hit to its China business, which historically represented 13% of Nvidia’s revenue, is expected to reshape the company’s financial performance in the near term. Analysts predict a notable decline in revenue and a significant impact on profitability, with Wedbush estimating a potential 12.5% hit to gross margin due to H20-related write-downs and quarterly losses of $3 billion to $4 billion from the China market.
Despite these challenges, Nvidia is actively seeking to mitigate the impact. The potential for a new AI chipset for China and the easing of the “AI diffusion rule,” which could open up markets in the Middle East, offer long-term opportunities. However, the immediate earnings report will serve as a stark reminder of the “biggest swing factor” that China now represents for Nvidia, leading investors to temper their expectations after a period of consistent “blowout beats.”