Beyond China: Nvidia Seeks Growth Amid Export Control Fallout

As Nvidia prepares to release its first-quarter earnings, the spotlight will be firmly on the repercussions of stringent U.S. export controls, particularly the ban on its H20 chip, which has severely impacted its once-thriving China market. CEO Jensen Huang has openly described these curbs as a “failure,” pointing to the fact that they’ve only accelerated the development of homegrown chips by Chinese rivals like Huawei.
The financial toll of these restrictions is expected to be significant, with analysts predicting a substantial dip in revenue and gross margins. Wedbush estimates quarterly losses of $3 billion to $4 billion due to the China business, leading to a projected 11-percentage-point decrease in adjusted gross margin. This marks a sharp contrast to Nvidia’s historical trend of consistently beating Wall Street’s revenue estimates.
In response to these headwinds, Nvidia is actively exploring new growth avenues. The modification of the “AI diffusion rule” by the Biden administration is set to unlock opportunities in regions like the Middle East, where Nvidia has already secured major deals to supply its advanced AI chips to Saudi Arabia. While these new markets offer promise, their near-term revenue contribution is anticipated to be modest, making the company’s ability to offset China losses the central theme of the earnings call.