Nvidia’s upcoming earnings report on Wednesday will reveal the initial impact of U.S. chip restrictions on China, but it may also highlight the company’s pivot to alternative markets like Saudi Arabia as it adapts to a transformed geopolitical landscape. After losing access to what CEO Jensen Huang estimated as a $50 billion Chinese AI chip market next year, Nvidia has secured agreements to sell hundreds of thousands of chips to Saudi Arabia, including 18,000 advanced “Blackwell” processors to a startup backed by the kingdom’s sovereign wealth fund.
The timing of this strategic shift is critical, as Nvidia expects to take a $5.5 billion charge related to restrictions on its H20 chip—the only AI processor it was previously allowed to sell in China. Huang recently revealed that these export controls have forced the company to abandon approximately $15 billion in potential Chinese sales, a significant blow considering China represented 13% of Nvidia’s revenue last year. Analysts from Susquehanna estimate the restrictions impacted the final three weeks of the April quarter, costing roughly $1 billion in sales, with potential quarterly losses of up to $4.5 billion for the remainder of the year.
These developments come at a pivotal moment for Nvidia, whose stock has fallen 2% this year after nearly tripling in value during 2023. The company is expected to report first-quarter revenue of $43.28 billion, representing a 66.2% year-over-year increase despite the China setback. However, analysts caution that while modifications to Biden-era export regulations may open new opportunities in regions like the Middle East, these markets will likely contribute relatively little revenue in the near term compared to the substantial Chinese business Nvidia has been forced to surrender.