Nvidia earnings beat expectations despite US export controls but dominance faces new challenges

Nvidia's profit hit $31.4 billion on revenue of $73.7b. Photo / Getty Images

Nvidia has reported earnings that topped market expectations, with a US$4.5 billion ($7.5b) hit from US export controls being less than the Silicon Valley chip juggernaut had feared.

Nvidia said it made a profit of US$18.8b on revenue of $44.1b, causing shares to rise nearly 4% in after-market trades.

Nvidia in April notified regulators that it expected a US$5.5b hit in the quarter because of a new US licensing requirement on the primary chip it can legally sell in China.

US officials had told Nvidia it must obtain licences to export its H20 chips to China because of concerns they may be used in supercomputers there, the Silicon Valley company said in a Securities and Exchange Commission filing.

The new licensing rule applies to Nvidia GPUs (graphics processing units) with bandwidth similar to that of the H20.

The United States had already restricted exports to China of Nvidia’s most sophisticated GPUs, tailored for powering top-end artificial intelligence (AI) models.

Nvidia was told the licensing requirement on H20 chips would last indefinitely, it said in the filing.

The new requirements resulted in Nvidia incurring a charge of US$4.5b in the quarter, associated with H20 excess inventory and purchase obligations “as demand for H20 diminished”, the chip-maker said in an earnings report.

US export constraints stopped Nvidia from bringing in an additional US$2.5b worth of H20 revenue in the quarter, according to the company.

Nvidia chief financial officer Colette Kress said US export constraints are expected to cost the AI chip titan about $8b in the current quarter.

“China is one of the world’s largest AI markets and a springboard to global success,” Nvidia chief executive Jensen Huang said in an earnings call. “The platform that wins China is positioned to lead globally; however, the [US]$50 billion China market is effectively closed to us.”

Nvidia chief executive Jensen Huang said demand for the company’s technology for powering AI remains strong and a new Blackwell NVL72 AI supercomputer, referred to as a “thinking machine”, is in full-scale production.

“Countries around the world are recognising AI as essential infrastructure – just like electricity and the internet – and Nvidia stands at the centre of this profound transformation,” Huang said.

Hot demand

Nvidia’s high-end GPUs are in hot demand from tech giants building data centres to power artificial intelligence.

Nvidia said its data centre division revenue in the quarter was US$39.1b, up 10% from the same period a year earlier.

The market had expected more from the unit, however.

“Nvidia beat expectations again but in a market where maintaining this dominance is becoming more challenging,” Emarketer analyst Jacob Bourne said.

“The China export restrictions underscore the immediate pressure from geopolitical headwinds but Nvidia also faces mounting competitive pressure as rivals like AMD gain ground on cost-effectiveness metrics for certain AI workloads,” Bourne said.

Revenue in Nvidia’s gaming chip business hit a record high of US$3.8b, leaping 48% in a year-over-year comparison and eclipsing forecasts.

The AI boom has propelled Nvidia’s stock price, which has regained much of the ground lost in a steep sell-off in January triggered by the sudden success of DeepSeek.

China’s DeepSeek unveiled its R1 chatbot, which it claims can match the capacity of top US AI products for a fraction of their costs.

“The broader concern is that trade tensions and potential tariff impacts on data centre expansion could create headwinds for AI chip demand in upcoming quarters,” Bourne, the analyst, said of Nvidia.

“This doesn’t signal an end to Nvidia’s dominance, but highlights that sustaining it will require navigating an increasingly complex landscape of geopolitical, competitive and economic challenges.”

– Agence France-Presse