Nvidia There is no sign of cooling in demand for AI infrastructure continues to see massive growth from the sales of graphics processors.

But for AI chip makers, Wednesday's earnings report was in a different mood than in recent quarters. There is a big reason: China.

On April 9, the Trump administration sent a letter to NVIDIA and stated that it would require an export license for the company's H20 chip, a version of its hopper processor designed specifically for the Chinese market to comply with previous U.S. restrictions.

Dating back to President Biden's tenure, the U.S. government has been concerned about AI chips from NVIDIA and other semiconductor companies Advanced Micro Devices Can be used to create supercomputers for opponents' military purposes.

After the new restrictions, NVIDIA said it would require $5.5 billion of inventory to be written. Analysts say it is the largest writing in the history of the chip industry. The potential impact on future income is high.

"The cancellation of such inventory means $15 billion in H20 revenue for 12 months," BNP Paribas analyst David O'Connor wrote in a note on Tuesday.

According to LSEG, analysts expect NVIDIA to report 66% revenue growth to $43.28 billion. While this growth level is much higher than any of NVIDIA's large peers' expansion levels, it marks a sharp slowdown a year ago, when the company's growth rate exceeded 250%.

With new export licensing requirements, there is a lot of uncertainty around the predictions for the rest of the time. Average analysts estimate that the current quarter is 53%, with a similar expected overall fiscal year, which will end in January.

NVIDIA is facing a bigger blow than expected, Morgan Stanley analysts wrote in a note Tuesday.

"While our thinking at the time was that at least it was what the management team expected, after the ban, it was clear that the company had already shown signs that the H20 would be fine and they were surprised by it," the analyst wrote.

NVIDIA shares are back after a tough start this year and are now growing about 1% in 2025, while Nasdaq shares are down about 1%.

Huang said in Taiwan earlier this month that Nvidia once had 95% of the GPU market share in China, but had reduced it to 50% under CHIP restrictions. NVIDIA said in a filing with the SEC in February that the company had annual sales of $17.1 billion, which is to provide customers with addresses in China, including the company's fourth largest market.

Huang recently argued that restricting NVIDIA chip exports to China would only inspire engineers there to propose their own processors, strengthening the country's AI semiconductor ecosystem and further threatening U.S. technology leadership.

NVIDIA received some good regulatory news in May when the Trump administration announced it would revoke the “AI proliferation rules”, which put more restrictions on exporting AI chips to China and other countries. Nvidia and AMD object to restrictions.

But the Trump administration has not completely withdrawn from the exports that regulate NVIDIA, he said at the time it was planning a new, simpler alternative to the proliferation rules.

Morgan Stanley analysts expect problems with the replacement of NVIDIA's H20 and its plans for China after this week's earnings report. They noted that NVIDIA is lobbying for permission to ship H20, which can be granted under the current system.

"The dialogue on what China will eventually allow, but there may not be a dialogue in this earnings call," they wrote.

watch: Expect Nvidia's guidance to be "better than fear"